Offshore Outsourcing - The Complete Guide (Forrester)

September 7, 2004
Oshore Outsourcing: The Complete Guide
Helping Business Thrive On Technology Change
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Forrester Collection | Oshore Outsourcing: The Complete Guide
Introducing Forresters Research Collections To resolve complex business issues, you need multifaceted insight. If you work on a project over time and tap into Forresters research regularly, your knowledge base builds gradually. But if you want to understand a challenge quickly, you must have instant access to its greater context. Oshore Outsourcing: The Complete Guide is the second report in this series. This collection of research combines Forresters best research on the critical issues surrounding oshore outsourcing, including objective, comprehensive guidance on: Understanding the risks and benets of oshore outsourcing. Using India as an outsourcing option. Creating an oshore outsourcing strategy. Choosing the right oshore destination and vendors. Thank you for your interest in Forrester Research. If you would like more information on Forrester, please visit us at www.forrester.com.
September 7, 2004
2004, Forrester Research, Inc. Reproduction Prohibited
F O R R E S T E R CO LLEC TION
September 7, 2004
Oshore Outsourcing: The Complete Guide

by John C. McCarthy, William Martorelli, Stephanie Moore, Lou Agosta, and Christine Ferrusi Ross
TABLE O F CO N T E N TS
3 Executive Summary 4 Overview Risks And Benets Of Oshore IT Outsourcing Trends In Oshore IT Outsourcing 2004 Unlocking The Savings In Oshore 12 Indian Outsourcing In The 21st Century The Rationale For Global Sourcing To India The Dominance Of The Leading Indian Suppliers Is Not Assured Proling The Six Leading Indian Suppliers Tier Two Indian Vendors: Challengers During 2004 Challenges And Risks In Working With Indian Firms 28 The Current Environment Case Studies Beverage Company Manufacturing Conglomerate Financial Services Company No. 1 Financial Services Company No. 2 33 The Future Of Oshore IT Outsourcing Enterprise Packaged Applications IT Infrastructure Help Desk Data Warehouse 63 Oshore Outsourcing Management Issues Implementing And Evolving Oshore Governance Creating An Oshore Communication Plan 80 Getting Your Internal House In Order IT Readiness Assessment 86 Choosing The Right Oshore Destination And Vendor Oshore Versus Nearshore Oshore Vendor Evaluation Process Further Vendor Selection Criteria The Trend To Consolidate Oshore Suppliers Oshore Program Management: Organization And Evolution Best Practices In Oshore Outsourcing From The Mouths Of Clients
2004, Forrester Research, Inc. All rights reserved. Forrester, Forrester Oval Program, Forrester Wave, WholeView 2, Technographics, and TechRankings are trademarks of Forrester Research, Inc. All other trademarks are the property of their respective companies. Forrester clients may make one attributed copy or slide of each gure contained herein. Additional reproduction is strictly prohibited. For additional reproduction rights and usage information, go to www.forrester.com. Information is based on best available resources. Opinions reect judgment at the time and are subject to change. To purchase reprints of this document, please email reprints@forrester.com.
TABLE O F F I G U R E S
Figure 1 Figure 2 Figure 3 Figure 4 Figure 5 Figure 6 Figure 7 Figure 8 Figure 9 Figure 10 Figure 11 Figure 12 Figure 13 Figure 14 Figure 15 Figure 16 Figure 17 Figure 18 Figure 19 Figure 20 Figure 21 Figure 22 Figure 23 Figure 24 Figure 25 Figure 26 How Clients Rate Oshore Versus US Providers Firms Face A Variety Of Oshore Hurdles Oshore Savings As A Percentage Of Revenue Examples Of Oshore Vendors And Second-Order Productivity Savings Export Market For Indian Software And Services SAPs Methodology SAP Oshore On-Site Model Wipros SAP Services TCS SAP Services Services That Indian Vendors Can And Cannot Successfully Deliver Technical Help Desk And Support Services: Selected Indian Oshore Vendors Characteristics Of Oshore Customer Segment Issues Holding Back Oshore Investment Vary By Experience Level The Evolution Of Global Sourcing Governance Steps In the Evolution of Global Governance Governance Provides Adult Supervision Governance Requires Consistent Oversight Key Vendor Approaches For Dierent Oshore Segments Constituencies To Consider In Oshore Outsourcing Communications Assessing Oshore Readiness: IT Process Readiness Assessing Oshore Readiness: Company Cultural Readiness Typical Oshore Readiness Groupings Suggested Strategies, Tractics, And Expectations For Oshore Readiness Summarizing The Geographies Evolution Of Global Delivery Model Oshore Vendor Segmentation
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EXECUTIVE SUMMARY Oshore outsourcing has become the US medias punching bag du jour. If high-paying software programming jobs follow their blue-collar counterparts overseas where labor costs are much cheaper, the thinking goes, it will get to the point that no job in the US is safe. This is an overly simplistic view. The forces driving oshore IT outsourcing are undeniably compelling. Companies are under intense pressure to reduce or at least contain IT costs. Years of downsizing has resulted in a shortage of skills and the need to improve service. Outsourcing in general and oshore outsourcing in particular frees companies to focus on core competencies, improve quality, and speed time-to-market. Customers can slash their costs by 50% or more by sending development or IT support oshore, although those savings will be oset to some degree by travel costs, management overhead, and telecommunications charges. Due to startup costs and increased overhead, savings generally do not accrue until the end of the companys rst year of using oshore providers. In addition to the cost advantage, countries like India the undisputed oshore leader oer high process maturity, a stable selection of vendors, and an abundant source of well-educated professionals. These benets come with an increased risk, as taking IT work oshore does not guarantee success or drive instant savings. Firms must understand that sending work to locations like India stresses their internal IT processes and challenges the companys internal culture. The maturity of internal processes and culture will have more to do with success than will the country or the vendor that customers select. Each organization must do a thorough job of examining its own oshore readiness. Companies that attempt to send their work oshore without preparing a strategy the quick and dirty approach are putting their cost savings and other benets in jeopardy. External oshore outsourcing risks run the gamut from culture clash and communications challenges to political instability and security issues. Internal oshore outsourcing risks, on the other hand, include a lack of proper governance, HR issues, problems with the migration of work to the oshore provider, and degradation in service quality. Firms should develop overall sourcing strategies of which oshore is one component and take a portfolio approach to determining what work to send oshore. CIOs should enlist the help of HR to decide what skills the organization will and will not need as a result of the oshore arrangement. Knowing how to exit the relationship with grace prior to entering the oshore agreement is a critical due diligence component. Choices abound when choosing both the country and the supplier India is not the only game in town anymore. China, the Philippines, and countries in the former Soviet Union are increasingly attractive. Oshore suppliers are expanding globally with the goal of location transparency. Customers must visit the oshore outsourcers in their native land. Availability of IT resources does not correlate with desirable cost or a low-risk business
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climate. Given the complexity of working through time zones, cultures, and multiple remote communications technologies, strong project management will be required to keep the project on track. Despite some negative press and instability in parts of India and other oshore programming destinations, there is increasing acceptance of the value and viability of using remote IT resources. In many companies, oshore outsourcing is imperative because of the cost and quality benets. During 2004, more companies than ever before will use remote programming and business processing resources to support their corporate goals. To get the most business value from oshore sourcing relationships, companies should develop an approach that takes into account the risks as well as the abundant rewards. OVERVIEW RISKS AND BENEFITS OF OFFSHORE IT OUTSOURCING Trends In Oshore IT Outsourcing 2004 During 2004, several key drivers will inuence the development of global or oshore outsourcing:
Companies need to reduce costs and remain competitive. Companies need to improve the quality of their software maintenance and
development eorts.
Companies need better predictability from the IT function. Many companies wish to change the entrenched IT culture while improving
IT processes and quality.
Companies increasingly accept and understand the value of oshore outsourcing:

cost, quality, and time-to-market benets.
All Global 1,000 rms have an increased awareness that some portion of their
IT function can be supported in lower-cost geographies; they realize that this is the wave of the future.
Many oshore rms have mitigated the risks associated with oshore outsourcing
relationships.
Oshore IT-enabled services rms are beginning to mature and have legitimate
customer references to support their value and safety propositions.
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Several trends are associated with these drivers. Companies Want To Move Quickly In Outsourcing To Low-Cost Geographies Companies that have never used oshore outsourcing before are now making plans to send large amounts of IT work oshore. Companies that already outsource oshore are planning to ramp their eorts signicantly this year. For example, several IT managers recently reported that they had been asked by executives to send one-third to one-half of all development and maintenance work to India during 2004. This trend represents serious risk for companies that are not adequately prepared to do remote global outsourcing. Companies Will Demand An Oshore Component In Every Major Outsourcing Deal This Year IBM Global Services reports that 100% of its requests for outsourcing support include a low-cost global sourcing option. Similarly, companies that already use oshore vendors or oshore resources, but have a large number of vendor sta performing duties locally, will transition this sta oshore to take advantage of cost benets. Indian Oshore Will Enjoy Heady Growth This Year Oshore outsourcing to India will grow by at least 30% this year. This will occur as global outsourcing/consulting rms, such as Accenture, EDS, and IBM, continue to increase their presence in India to: 1) compete against the major Indian vendors, and 2) accommodate companies that are struggling to do more with less. Using India as an oshore destination has quickly developed into an optimization strategy rather than a pure cost containment strategy, due to the quality and productivity benets being realized. Companies should make quality improvements an integral part of all Indian oshore outsourcing engagements. Global 1,000 Firms Will Keep Replacing Contractors With Oshore Vendor Support As companies move to remote programming models, they typically replace external contractors before considering replacing internal sta. In fact, many never intend to replace internal sta. Their goal is to reduce external contractor expenditure and free up internal sta to do more mission-critical (i.e., interesting) work. US-Based Outsourcing And Consulting Firms Will Increase Oshore Resource Pools Some rms will increase their oshore partnerships, while others will open or increase their own facilities in countries like India, Mexico, the Philippines, the Czech Republic,
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and Hungary. They will have to do this to: 1) satisfy client demand for labor arbitrage; 2) lower their cost of delivery in a highly price-sensitive market; and 3) compete with the increasingly inuential and inexpensive oshore vendors. Accenture has already increased its Indian presence from approximately 150 sta two years ago when it opened its rst low-cost delivery center in India to 4,100 at the end of November 2003. Similarly, IBM Global Services is counting on its global delivery capability (e.g., low cost, remote programming, and support capability) to dierentiate it against competitors, such as EDS and CSC, as well as to grow its business. IGS is signicantly in front of EDS and CSC in terms of this capability, but it will invest even more during 2004 in growing this group. To stay competitive with IBM and others and to accommodate its client base, EDS is also increasing its India presence and has recently expanded its Indian oerings to include technical help desk outsourcing something IBM does not oer from India. BearingPoint, which previously had no oshore capability, opened facilities in China and Dublin, Ireland, in 2003. While BearingPoint has high hopes for both facilities, it is unlikely that it will be able to eectively support North American or European clients from these facilities, given the limitations of China (the language barriers, lack of intellectual property and copyright laws, and lack of processes) as an oshore outsourcing destination today and the high cost and shortage of IT labor in Ireland. Mexico And Canada Will Continue To Be Strong Nearshore Alternatives While Mexico has limitations in terms of resource pools and language skills, the government is heavily investing in the software development industry. Mexican colleges and universities are turning out qualied English-speaking software engineers. Mexican companies like Softtek and US companies like IBM have achieved Software Engineering Institutes (SEI) Capability Maturity Model (CMM)-level certications and have strong customer references to prove their capabilities. Canada has little or no language or cultural barriers, and the Canadian government is focused on growing its software and services export business. The North American Free Trade Agreement (NAFTA) makes trade with Mexico and Canada simple. As companies look to accommodate an ever-increasing piece of their IT portfolio using lower-cost remote resources, they will nd Mexico and Canada useful alternatives for projects or systems that are not suited to long-distance oshore outsourcing. Fortune-Class Companies Will Require Oshore Vendors To Have Mature Processes In Place The majority of large, reputable Indian outsourcing rms development centers (e.g., TCS, Syntel, Infosys, Wipro, Cognizant, Covansys, Satyam, Patni, and Birlasoft) have been assessed at Level 5 on the SEI CMM. Sophisticated buyers realize process maturity equals quality. Furthermore, they will be unwilling to deal with oshore rms that cant guarantee
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this quality. It is now a prerequisite for most Fortune-class companies investigating oshore relationships. Companies Will Increase Their First-Time Investments With Oshore Providers In the past, pilot projects were very small in the $50,000 to $300,000 range. Today, companies are increasing their rst-time project size as they grow more comfortable with the process and the vendors themselves. Companies Will Continue To Experiment With Reverse Auctions Using reverse auctions as means of getting the lowest price is a dangerous practice. Forrester recommends that companies seek partnerships in which both parties are motivated to provide and receive the best possible service and value at the most realistic price point. Companies Will Install Centralized Program Management Oces Or Governance Structures These structures will manage, monitor, or consult on oshore outsourcing relationships at the corporate level. Today, companies often have multiple oshore relationships with multiple vendors within dierent business units or groups. In many cases, these projects dont take advantage of existing knowledge, experience, standard processes, and practices, evaluation metrics, SLAs, or master services agreements/contracts. The result: Companies have increased overhead costs and risks and are not able to leverage existing vendor relationships. As their approach to oshore outsourcing matures, sourcing governance structures will become a standard practice. Companies that do not put centralized structures or processes in place for managing and monitoring oshore relationships will be more susceptible to project failures and cost overruns. Software Vendors Will Do More R&D And Support Work Oshore This Year Vendors like Oracle and IBM already do R&D and product support from India. Microsoft is currently increasing its global resource pools to accommodate software development and support. Given that R&D burns such a large percentage of software vendors revenue, the potential for 25% to 60% savings over current costs is signicantly more important to them than to the average user company whose spend on IT is generally in the range of 3% of revenue.
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Unlocking The Savings In Oshore To understand the current demand for oshore services, Forrester interviewed VPs and directors of IT as well as business unit decision-makers at 145 North American rms. We also did in-depth follow-up interviews with 20 of the rms that are using oshore providers. The 44 respondents in this survey using oshore providers clearly felt they provide real value 75% somewhat or strongly agreed that oshore providers do high-quality work, and 76% felt that they provide a low-cost solution. As a result, 65% of rms using oshore services acknowledged that cost savings oset additional management overhead incurred by having work done remotely. A number of rms also saw second-order benets from the process discipline of the third parties. Our catalyst to go oshore was not to save money; rather, we wanted to improve IT. We spent $1.5 million the rst year to ramp up for oshore. By year two, we saw cost savings. Now our budget is the same as 1999, but we are working on 16 incremental new initiatives. (Diversied outsourcing services company) The error rate when patches are applied to our production systems is less than 1%, down from 3% when we did all the work. This improvement is a direct result of our oshore providers adherence to CMM processes. (Insurance company) As a result of oshore, we have cut our internal IT rates 5% to 10% per year, even as infrastructure and salary costs have increased. And a key measure of performance system availability has improved by 10% to 15%. (Financial company) Respondents Feel Oshore Providers Provide Better Value Than US Counterparts When we asked interviewees how their oshore suppliers rated, 88% say that they provide somewhat better or much better value for the money compared to their US-based counterparts (see Figure 1). In addition, 71% of the users stated that oshore providers delivered somewhat better or much better quality work. A hidden benet was the vendors due diligence process, which revealed that our traditional Big Five vendor was not adhering to its SLAs for creating and maintaining documentation. (Telecommunications company) Our Big Five providers CMM levels are lower than our oshore providers. For example, when a Big Five player took our maintenance oshore, it did not warn us that to transfer work to India, we needed a multisite license for our development tools. We were delayed by weeks because of this oversight by the Big Five rm. (Commercial bank)
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Figure 1 How Clients Rate Oshore Versus US Providers
Internal Management Is A Top Challenge The biggest issues for interviewees using oshore rms revolved around areas like project management and dening accurate performance metrics for managing the remote vendor (see Figure 2). Historically, we have been lax in creating specications, and this has caused problems in an oshore engagement you cannot ask questions and expect responses on demand when your sta is half the world away. We have a renewed focus on creating clear work orders. (Financial company) We had to recast every process to leverage oshore our development methodology, our network architecture, as well as our compliance and risk-management practices. We had to put a long-term plan in place for network and security infrastructure. (Commercial bank)
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Figure 2 Firms Face A Variety Of Oshore Hurdles

Veterans Realize Additional Productivity Gains Over Time Although total oshore utilization is unchanged, experienced oshore outsourcers are satised noting additional savings over time. Customers at CMM level 1 or below take increasing advantage of providers CMM Level 3+ process discipline, enabling more ecient IT and more cost-eective business process outsourcing (BPO) operations. The two waves of savings beyond a simple reduction in labor costs include (see Figure 3):
Application of the vendors CMM expertise. Suppliers like Infosys Technologies,
Larsen & Toubro Infotech (L&T Infotech), and 24/7 Customer apply their CMM or COPC expertise to further re-engineer client work. This second round of savings could be 15% to 20% of the initial contract depending on its size (see Figure 4). For example, Wipro clients see additional application maintenance productivity of 10% to 15% from added familiarity with systems; another 10% to 15% raise in productivity after applying Wipros CMM-based methodology and consolidating redundant programs applications; and yet another 3% to 30% productivity improvement thanks to process automation and tools.
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Figure 3 Oshore Savings As A Percentage Of Revenue

Figure 4 Examples Of Oshore Vendors And Second-Order Productivity Savings

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Signicant BPO benets. Pioneers today take advantage of third-party BPO startups
as well as IT-heritage companies that provide second-generation oshore services like call centers and transaction processing. The savings as a percentage of company revenue from these functions will be four to ve times those from IT, using the model where IT spending averages 4% of revenue and SG&A is 22% of revenue. The same process improvement will be applied to a broader segment of the company in areas like accounting and claims processing.
INDIAN OUTSOURCING IN THE 21st CENTURY Despite an intensifying potentially political backlash in its core North American market, the Indian IT service market continues to grow dramatically. Fiscal year 2004 should see an overall increase in software and services exports of roughly 30%. This growth is far in excess of that experienced recently by global providers, which are growing at a single-digit rate or shrinking in some cases. Much of this growth has accrued to the largest Indian suppliers, which have done an excellent job in enlisting new customers and providing quality services at low cost. Indeed, most Forrester clients gravitate toward these larger rms for the bulk of their oshore outsourcing requirements. However, customers should keep in mind that it is not only overall size and breadth of services that matters, but also the manner in which these companies can engage with their customers. Forrester considers HCL, Infosys, Satyam, TCS, and Wipro to be the largest Indian vendors, as well as Cognizant, by virtue of its extensive growth and market leadership. According to NASSCOM, the export market for Indian software and services is estimated to be $12.2 billion for FY 2004 (see Figure 5). This compares to $9.54 billion for FY 2003, $7.65 billion for FY 2002, $6.217 billion for FY 2001, and $3.962 billion for FY 2000. While these gures are impressive, they exclude the on-site work performed by US-based vendors Cognizant, Covansys, Intelligroup, and Syntel which would make the total revenue signicantly higher. The Rationale For Global Sourcing To India The rationale for outsourcing to India remains strong. Oshore contracting using Indian resources represents a high-quality, low-cost outsourcing alternative. In the past, many IT organizations used oshore contractors only for legacy grunt work for a variety of reasons (e.g., Indian vendors didnt have suciently diverse skill sets; the challenges of using oshore contractors for more value-intensive work were deemed too great; the risks for more mission-critical project outsourcing had been viewed as prohibitive). But as eBusiness technology skills shortages, Y2K remediation needs, and time-to-market
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constraints intensied in the late 1990s and 2000, many companies looked to Indian vendors to ll in the gaps. The Indian vendors responded with relevant skills, quality processes, time-to-market benets, service-level improvements, and, of course, cost benets. These companies entered the Global 500 IT organization in a Y2K or eBusiness guise and have been embedded there ever since. Today, the market continues to mature, and there is an increasing acceptance of the value of using Indian resources, even as sporadic political unrest in India makes the oshore outsourcing equation more risky. The major reasons for the continuing success of Indian rms include:
Cost savings. Most of the early oshore outsourcing decisions were motivated by
reduced costs, and overall price advantages of 30% to 60% are still possible. During the late 1990s and 2000, however, companies were looking to India primarily to deal with time-to-market pressures. Today, cost-cutting is the focus. Companies have become comfortable with the idea of outsourcing to India and now are looking to scale their oshore outsourcing eorts in order to cut costs further (a 50% cost reduction threshold is widely viewed as the minimum justication). Although wages are rising in India due to intensifying competition for resources, Indian rates have remained competitive and highly attractive, particularly in combination with Indias many other benets.
Figure 5 Export Market For Indian Software And Services
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Mature, experienced, and stable vendors. India continues to boast the worlds most
experienced practitioners of global sourcing, including the six most often cited leaders: Cogizant, TCS, Wipro, Satyam, HCL, and Infosys. In addition to these companies, emerging leaders include Patni and Syntel along with a host of second- and third-tier rms also contend eectively. In structured evaluations of potential global sourcing partners, the size, strength, process maturity, and extensive reference lists of these companies are strong determinants to continued success, despite the rising prole of companies in alternative geographies and the oshore activities of global integrators. The leading Indian rms remain remarkably free of negative perceptions and horror stories that have bedeviled other leading systems integration rms. This, coupled with the large and growing scale of these companies, has helped convince many potential customers that India is the way to go.
High-quality products. Indian companies produce very high-quality results and have
made a clear commitment to software process disciplines. For example, most tier one and tier two Indian services rms have achieved ISO 9000/1 certication and an SEI CMM Level 5 assessment. To date, there are more SEI CMM Level 5-assessed rms in India than in any other nation. In addition, many rms, such as Wipro and Satyam, are also focused on Six Sigma. And many more are focused on the newer, multifaceted CMM assessments people-CMM (P-CMM) and CMM-integrated (CMM-I).
Forrester clients might well ask, what does quality really mean in this context? The answer is that Indian vendors, because of this intense focus on process, are able to deliver code with fewer errors, faster. To achieve this, sta must strictly adhere to processes and thus they are more meticulous in terms of documentation, release planning, and testing. Software development is a science in India, not an art. The top-tier Indian vendors also collect metrics and use them eectively to improve. They are constantly measuring themselves. Metrics collected include errors per line of code, in-process defects, defects delivered to customers, rework costs before and after user acceptance testing (UAT), rst-pass user acceptance, cost overruns, and deadline accuracy.
Ability to normalize demand for stang. The extensive resources and optimized
stang processes of Indian rms allow their customers to deal with peak periods of demand while avoiding having to hire personnel that will not be needed later. Many companies use Indian vendors in this type of sta augmentation arrangement. In this situation, companies may realize only cost benets associated with labor arbitrage and arent able to take advantage of some of the other benets that Indian vendors bring to the table such as internal software process improvement or improved systems maintenance processes.
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Accelerated delivery. Indias distance from North America opens up opportunities to
leverage the time dierence to achieve, in eect, a 23-hour development operation. By orchestrating in-house and oshore resources eciently, organizations can compress development cycles. However, the management overhead required makes it easy to fail at this approach. In addition, Indian sta is typically very productive. Not only is the work day and week longer in India than it is in the US, but the programmers themselves are more productive because of their faithfulness to process. Once a vendor takes over a system, it is typically able to improve and streamline the maintenance activities by using more mature processes (development, maintenance, and testing) and/or by enhancing the structure of the system. So, for example, a system that requires 10 full-time employees (FTEs) for support might only require eight FTEs after three months and six after six months. Companies should put incentives in place so vendors do improve the supportability of systems and reduce the headcount required to support these systems. A time and materials approach will not motivate vendors to reduce project headcount, whereas a carefully structured SLA and a xed price contract will.
Access to a diverse set of skills and support for new technologies. Many people
continue to believe that Indian vendors are able to supply only a narrow set of skills typically mainframe and COBOL. This is because the Indian vendors are still closely associated with Y2K remediation projects. In fact, the Indian vendors have limited mainframe experience. There were few mainframes in India after that countrys attempts to encourage a domestic computer industry during the 1970s, which succeeded only in alienating international suppliers, including IBM, which left the country in 1977.
Today, Indian vendors oer everything from mainframe to Unix to ERP to CRM to .NET to Web services to embedded software to wireless application development to application architecture skills. The Indian vendors are masters at all types of application development and are often hired by software vendors like IBM, Microsoft, SAP, and Oracle to do their product development. Many Indian vendors also oer management consulting services, infrastructure outsourcing services, help desk, and desktop outsourcing services. To be sure, the Indian vendors do not have the depth of experience in these non-application areas as they do in the application areas, but they are likely to develop the requisite skill sets during the next two years.
Filling the skills gap. Given the breadth and diversity of development skills required
in IT organizations today, oshore outsourcing presents a solution for these issues. Today, in most cases, companies are not replacing internal sta with Indian vendor sta. Rather, they are often either getting rid or contractors or freeing up internal
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sta from maintenance activities to work on more strategic projects. In other cases, companies use the Indian vendor sta for skills, perhaps leading-edge skills, they havent yet developed internally. The Indian Export Market Diversies And Matures In addition to its overall growth, the market is also diversifying and expanding to encompass non-application-related services. Whereas in the past, Indian suppliers focused primarily on delivering application-related services, they now oer everything from applications support to infrastructure management (including data center outsourcing, network management, data center consolidation, strategic consulting, and help desk outsourcing) to various avors of BPO, or IT-enabled services, as they are typically termed. Further, the market is maturing. In addition to oering a broader range of services, many of the players in the market now oer value-added services that help to ease the transition to outsourcing or improve an organizations ability to eectively outsource. Skills like relationship management, organizational change management, and customer advocacy are now part of some vendors portfolio of skills. Leading Indian vendors deliver more customer-intimate enterprise solutions for clients, just as top-tier US and European vendors do. The Dominance Of The Leading Indian Suppliers Is Not Assured Despite their impressive record of growth, several factors challenge the continued dominance of leading Indian suppliers. Some of these challenges relate to the vendors rapid growth. Others have to do with emerging alternatives smaller competitors in India, competitors in other geographies, or the leading global integrators moving into the Indian market. There are a number of challenges to the continued dominance of the leading Indian rms. Alternative Geographies Are Emerging The enthusiasm of North American customers for the leading Indian suppliers shows no signs of waning. Yet some companies are considering a number of oshore and nearshore alternatives, including China, Ukraine, Russia, the Philippines, Ireland, and Canada. Forrester clients should beware, however, as they evaluate these alternatives: While costs are somewhat comparable in a number of oshore countries, few countries are as advanced as India in terms of their outsourcing capabilities, telecommunications infrastructure, experience, and quality. Despite the fact that leading Indian rms have yet to suer materially from alternative geographies, they are mindful of the long-term threat and are seeking to expand their geographic footprints to serve both global and local customers.
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Competition Is Increasing Due To Inux Of US And European Vendors Global IT services companies like Accenture, IBM, Xansa, Cap Gemini Ernst & Young, and EDS are establishing or growing their oshore facilities in India for a variety of reasons: satisfying client demand for labor arbitrage, lowering their cost of delivery in highly price-sensitive markets, and competing directly with the increasingly inuential Indian vendors. Already, Accenture has increased its Indian presence from approximately 150 sta resources two years ago (when it opened its rst low-cost delivery center in India) to 4,100 sta resources at the end of November 2003. Similarly, IBM Global Services is counting on its global delivery capability (low cost, remote programming, and support capability) to dierentiate it from competitors, such as EDS and CSC, and grow its overall business. This inux of multinational rms has led to increased competition for qualied development resources. It has also contributed to upward pressure on wages because the multinational vendors are luring sta away from the Indian vendors with higher wages and better benets. Yet overall average billing rates within India have remained highly stable. This may not be the case as competition inevitably intensies. Attrition Rates Are Soaring As Competition For Resources Increases As the competition for labor increases, the attrition rates also increase. Our research shows that in the IT services arena alone, attrition rates at Indian facilities have jumped to the 25% to 30% range depending on the rm. Our research also indicates that in the BPO arena attrition rates are inching into the 40% area in some cases. Clearly, it is extremely important for customers to ensure that the Indian vendor with which they work has state-of-the-art HR abilities and processes to recruit, retain, and train IT sta. In addition, companies must make sure contracts specify acceptable turnover rates on projects and the level of seniority required on projects. Rapid Growth Challenges Vendors And Adds Risk To Client Engagements To make matters worse, Indian vendors need to increase headcount rapidly to accommodate new business. Infosys, for example, grew from about 15,000 employees ast year to about 25,000 employees this year. Today, Wipro brings in about 200 recruits every Monday. In addition to nding the qualied resources to hire a Herculean task in itself the vendors have to assimilate and train this new sta quickly. Each recruit has to learn the vendors culture and processes required to deliver quality results. Even if we assume that every vendor can train and assimilate sta quickly, most clients are going to nd themselves with a preponderance of unseasoned junior sta on projects.
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Vendors have also had to expand their engagement and relationship management sta, an area where there has always been a critical shortage. Therefore, most sta in this category will have little oshore outsourcing experience and even less client engagement management experience. It is critical that vendor relationship or engagement managers understand the oshore outsourcing process fully and are able to help clients navigate its complexity. If they cannot, the projects chances for success are limited, particularly when the client does not already possess experience in outsourcing. Clients must ensure that the vendors engagement or relationship manager is qualied to play this vital role. The bottom line is that this scaling is likely to cause service degradation as the vendors attempt to assimilate masses of new employees. Clients must guard against such potential degradation of service through eective contract clauses and SLAs, as well as close examination of HR policies at the vendor selection stage. Breadth Of Service Lines Is Both A Boon And A Bane For Customers Vendors in the leader category are expanding their service lines to provide clients with a full-service oering. Clients are encouraging their vendors to provide additional services for a number of reasons: existing trust in their vendor partners, desire to replicate the value they have already received from oshore applications outsourcing, and a preference to minimize the complications of managing multiple suppliers. However, choosing a variety of services from a single supplier risks suboptimizing individual selections (as opposed to pursuing a best-of-breed strategy). While the leading Indian suppliers are certainly experts at rapid training, clients should not expect Indian vendors to become business process or data center outsourcing experts overnight. The truth is that the vendors are often learning from their clients in these new areas. This means that clients will need to exert more oversight in critical knowledge transfer and process synchronization processes. Moreover, because the vendor experience level is immature, clients cannot expect signicant or immediate improvement in these new service lines as they can in the applications arena. For the near term, process improvement in non-application areas is going to be a joint client/vendor eort. Client Relationship Management Emerges As The Key Dierentiator All of the leading Indian suppliers possess mature infrastructure, robust development processes, and typically very broad capabilities. In fact, these capabilities are so broad it can be dicult for many customers to tell the leading vendors apart. Since signicant dierences exist, customers should evaluate these capabilities carefully. One of the most important areas of dierentiation lies in the vendors engagement and relationship management philosophy and overall relationship management skills. Some Indian suppliers are easier to work with than others. By providing the kind of engagement style
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that customers are used to from domestic suppliers, these suppliers provide transparency in relationship management. The level of relationship transparency required by any customer will vary depending on the oshore outsourcing maturity of that customer. Early adopters with signicant experience in managing oshore suppliers, for example, will not need these skills as much as beginners. Moreover, these competencies will not be as important in a relationship based on sta augmentation as they are with projectbased engagements, where a close, exible, and transparent relationship with suppliers is essential. One of the principal reasons Cognizant has been included in the leader category is its mature relationship management skills. The importance of relationship managers called dierent things in dierent companies cannot be underestimated. For the vendor, good relationship managers pay for themselves because they are experts at winning new business, as well as uncovering or developing revenue opportunities within existing accounts. Ideally, they also perform critical customer care functions by identifying and attacking problems as they arise. They also act as the intermediary between the client and the suppliers numerous development or support teams. Unfortunately, Indian vendors are inconsistent in their approach to relationship management and have experienced diculty in establishing eective relationship oversight across multiple service lines. The goal for all leading Indian vendors is to become one of the top 10 IT services vendors in the world not just one of the leading Indian suppliers. Although they still have a long way to go to match the size and scale of long-term global integrators, nothing less than the future of the entire IT services industry is at stake. In an eort toward this, many leading Indian suppliers have expanded their service oerings and put in place seasoned management teams. However, the key success factor will be the vendors ability to function at all levels like a global IT services consulting rm. Proling The Six Leading Indian Suppliers Cognizant Overview: Cognizant has emerged as the most successful and prestigious of the US-based hybrid oshore suppliers. It has roughly $350 million in revenue, nearly all of which is application development and maintenance. Strengths: Cognizant can point with pride to high customer satisfaction and a reputation for exibility among its clients. The recent transition from former CEO Kumar Mahadeva to current CEO Lakshmi Narayanan has been smooth. Cognizant is known for its excellent customer relationship disciplines, including its pioneering use of American nationals for key customer relationship roles in North America.
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Weaknesses: Cognizant has a relatively narrow range of service oerings and does not yet participate signicantly in the infrastructure management and ITES segments. It has only recently moved to pursue the enterprise applications opportunity with a recent hire out of Intelligroup and its acquisition of Ygyan, an SAP consulting shop based in Pune, India. The skinny: Cognizant is beginning to expand its range of options, but it remains rmly rooted in the application development and maintenance market. Potential customers should consider it a strong choice for application development and maintenance projects, particularly for customers that need a high degree of relationship transparency and customer intimacy. Cognizants emerging capabilities in package implementation and ITES are intriguing but remain in an embryonic stage. HCL Technologies Overview: Hindustan Computers (HCL) was founded in 1976 as a minicomputer-oriented IT hardware company. It is Indias most well-known hardware company. In 1994, it spun o a separate software development company called HCL Technologies, which has since become one of Indias leading export suppliers. HCL Technologies has been prolic in forming joint ventures with other companies, having established alliances with Perot Systems, James Martin (now Headstrong), and Answerthink. In 2001, HCL Technologies purchased a controlling interest in Deutsche Banks IT subsidiary, Deutsche Software. Strengths: HCL Technologies is the fth largest Indian IT services supplier and is one of the oldest. It has an impressive breadth of skills outside the enterprise application space. HCL also has signicant experience providing product development services to independent software vendors and possesses strong expertise in embedded systems. Weaknesses: HCL has only recently begun to focus on growing its own direct user business and is still learning how to accommodate the enterprise customer. While it has an impressive list of enterprise customers, HCLs revenues have been derived primarily from joint venture partners. This means HCL is less experienced in addressing the nontechnical, soft needs of enterprise customers. The skinny: For companies that want to form a joint venture in India or engage in a large sta augmentation relationship, HCL is a top choice. It is also a top choice for embedded systems engineering and product development work. To accommodate the enterprise user customer that wants to fully exploit oshore outsourcing, however, HCL will need to improve its customer relationship management skills and processes.
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Satyam Overview: Satyam was founded in 1987 and is listed on the New York Stock Exchange. Its core business is application development and maintenance, primarily to North American customers. In addition to serving customers directly, Satyam partners with large US-based systems integrators like EDS, CSC, and IBM to support its customers global delivery needs. Strengths: Satyam possesses excellent skills across the IT spectrum from application development and maintenance to ERP and infrastructure management. It is also one of the few Indian vendors that has taken over a US-based clients data center. Satyams geographic reach is also superior to any vendor in the leader category, except TCS. Satyam has strong practices in the nancial services, insurance, and healthcare industries. Its telecom and automotive industry practices, in which Satyam provides IT support as well as embedded and engineering support, are especially strong, too. Weaknesses: Satyams strategy of holding strong partnerships with large global players has a downside it often leaves the company in the position of a subcontractor, which doesnt encourage Satyam to develop its relationship management skills. Consequently, Satyams relationship management capabilities lag those of other leading Indian suppliers Cognizant and Infosys, in particular. The skinny: Companies in the automotive and telecom space, where Satyam has robust relationship management and industry skills, should consider Satyam a top alternative. However, customers in other industries should be prepared to participate in project oversight because Satyam has yet to develop the client management skills to provide full relationship management transparency. In some industries, such as automotive and telecom, Satyam clients can expect the vendor to be proactive. In others, clients will have to take a more active approach. Infosys Overview: Infosys is among the largest and most successful of Indian outsourcers and has demonstrated mature relationship management skills in dealing with its large North American client base. Infosys expects to end scal year 2004 with $1.05 billion in revenues and 23,000 employees. Software package implementation and management are growing priorities: Infosys expects to perform $140 million in package business this year, primarily in SAP and Oracle. Infosys Technologies recently announced the creation of a wholly owned US-based subsidiary, Infosys Consulting. The new company, which will focus on delivering high-value business/technology consulting, will be headquartered in Fremont, Calif. It will be headed by former Deloitte partner Stephen Pratt and three other heavy hitters from the high-end consultant ranks. Infosys, like its Indian competitors, has long coveted a position in the top ranks of the global IT services world. Infosys Consulting will
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be Infosys Technologies and indeed any Indian vendors most aggressive move to date in that direction. Strengths: Infosys possesses great strengths in application development and maintenance. In 2002, it formed its Progeon BPO subsidiary, which had roughly 1,400 employees at the end of last year. Infosys has been able to maintain impressive growth despite some executive turnover, particularly in the marketing ranks. Weaknesses: Although Infosys progress in ITES and IT infrastructure management are promising, the companys revenues remain highly concentrated in application development and maintenance activities. Infosys is growing so rapidly that it may be a victim of growth some customers detect arrogance in its recent approach to the market. The skinny: Infosys should be considered among the premier suppliers of application development and maintenance and evaluated primarily as such. Its signicant investment in ITES and infrastructure management skills will improve Infosys position and skills in these areas by year end 2004. Its mature go-to-market disciplines are strengths for North American customers, despite the challenges brought by rapid growth. TCS Overview: TCS is part of the Tata Group, the largest industrial conglomerate in India; it was spun o in 1968. It is arguably the rst rm to provide oshore development and maintenance for US-based rms and is indisputably the father of the professional services industry in India. Strengths: TCS has a strong blue-chip client base and can provide a client with a full-service oering. Since its CMC acquisition, TCS has the most experience with infrastructure outsourcing of any of the Indian vendors. Most of these services are delivered on-site. TCS also possesses expertise in nancial services and strong ERP skills, and its size and geographic reach are unparalleled among leading Indian suppliers. Weaknesses: TCS weaknesses are not related to its technical skills or its ability to deliver quality results. The company is well-equipped on both counts. Rather, they are related to its lack of transparency in nancial results and relationship management. TCS, because of its size and sta augmentation history, tends to lag some of the other providers in its relationship management capabilities. TCS is working to improve these capabilities, but it still lags the leaders. In terms of improving its nancial transparency, the rm went public in August 2004.
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The skinny: TCS on-again, o-again plans for public ownership can be a distraction. Its role in project-related engagements may lag that of other providers, but its size, track record, and broad capabilities cannot be overlooked. Companies interested in working with TCS simply need to ensure that TCS provides sucient relationship management expertise. Wipro Overview: Wipro was originally a cooking oil company (Western Indian Vegetable Products), but Azim Hasham Premji took over the company in 1968 after the death of his father and formed Wipro Technologies. Since that time, the company has diversied into hardware, software, and IT services, and today Wipro Technologies is the second largest software services exporter in India (behind TCS). Strengths: With Vivek Paul currently at the helm, Wipro is a well-managed and progressive company. Since Paul runs Wipro from his oce in California, the company has a good feel for the North American market and what it needs to do to become a strategic supplier. Pauls placement in North America also helps Wipro build brand awareness. In fact, because of its brand, impressive size, and breadth of capability, Wipro is often selected as a strategic partner by customers seeking large, broad-based capability in their primary oshore outsourcing providers. Recent acquisitions aimed at improving vertical go-tomarket eciencies are bearing fruit. Weaknesses: The transition from an India-centric rm to one of the favorites among North American customers is well under way but remains incomplete. Wipro is improving its relationship management disciplines. The skinny: Customers that have a broad range of requirements but only have one major supplier should choose Wipro. It is active in all major functional segments with a broad range of vertical industry capabilities. Tier Two Indian Vendors: Challengers During 2004 The market for Indian IT services is extremely crowded and confusing. Only a few very large vendors have been able to separate themselves from the pack. Vendors like Wipro, HCL, Infosys, TCS, Satyam, and Cognizant have developed a brand and established their position at the top of the IT services market in India. However, there is no way that these six vendors can accommodate all the business that US, Western European, and AsiaPacic customers will bring to the Indian market during the next 12 to 18 months. There is also no way that this group can provide all the horizontal and vertical expertise that its customers will demand. Thus a group of vendors, whose manageable size and focused
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oerings is rapidly becoming a positive dierentiator, will emerge as leaders in the second tier of the Indian vendor market as challengers to the tier one Indian vendors. This group comprises reputable vendors, all assessed at CMM Level 5, some of them publicly held, all with strong track records, and blue-chip client lists that can be referenced today. Customer Service And Flexibility Benets In the world of the tier one Indian rms, few clients are considered tier one customers. These vendors consider $2 million to $3 million relationships small compared with their tier one clients who spend between $10 million and $25 million per year. As such, customer service for the average (in terms of spend on Indian IT services) client can suer. While early adopters like American Express may have a dedicated relationship manager and access to the vendors CEO, Acme Widget Corp. probably does not. Forrester hears complaints today, even from Fortune 100 clients, that the tier one vendors have become arrogant, they are no longer as exible as they used to be, and they are becoming as dicult to navigate as EDS or IBM Global Services. Smaller vendors typically treat all clients as tier one clients and are innitely more exible. As these vendors grow in the next 24 months, some of the customer service and exibility benets will diminish, but in the meantime, customers should take advantage of these benets and establish themselves as tier one customers of tier two vendors early. Focused Oerings Clearly Dierentiate Smaller Vendors The vendors in this category have to be careful not to position themselves in the same category as the top-tier Indian vendors, and most of them have not. Tier two vendors tend to market their focus and expertise to specic areas or niches. Some of the vendors focus on a particular vertical industry, horizontal technologies, or both. For example, while the following vendors tend to focus on several dierent verticals or horizontal technologies, they are especially strong in specic areas:
ITC InfoTech. CPG and CRM. Intelligroup. SAP and PeopleSoft. L&T InfoTech. Manufacturing industry and SAP. i-Flex Solutions. Financial services only.
These vendors also provide a breadth of services and support several industries, with the exception of i-Flex. However, they are often better than the tier one vendors in their
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specic niches because they dedicate resources above and beyond delivery personnel to developing best practices and methodologies. Other vendors in the emerging leader category include:
Birlasoft. Hexaware Technologies. Polaris. Syntel. Covansys. Patni. Mphasis. Mindtree Consulting. Sonata Software.
Syntel, Covansys, and Patni fall between tier one vendors and the tier two challengers. They are all rapidly heading into the tier one category. They oer a breadth of services and typically compete against the top tier, yet they possess the exibility and customer service benets of the vendors in the second tier. Challenges And Risks In Working With Indian Firms Indian vendors in some ways are potential victims of their own success. Because of their track record, many customers have come to see working with Indian companies as the safest possible choice. While this may be true, some customers have become dangerously complacent when it comes to engaging with Indian vendors to support and develop their IT systems. Until now, companies have had such positive experience with Indian vendors because they have thoroughly prepared to work with these vendors and, to the extent possible, mitigated the risk associated with oshore outsourcing. Companies need to continue to acknowledge and understand the risks and put processes in place to mitigate those risks.
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Knowledge Transfer Is Most Signicant Risk The ability to transfer knowledge eectively during transition continues to be the most signicant risk in dealing with Indian suppliers (and global sourcing partners in general). The challenge is made doubly dicult by the requirement to retain sta members who may lose their positions once transition is complete in order to eect the transfer. Paying signicant attention to this key stage in the outsourcing life cycle is absolutely paramount, even if the potential for cost savings is eroded as a result. Cultural Issues And Clashes Must Be Addressed Culture clashes and miscommunications can derail any collaborative IT project, and the potential for cultural conict while working with Indian rms remains a risk. The Indian culture remains very dierent from the American culture. Americans are much more aggressive and communicative than Indian developers, who may appear to be much more passive and eager to avoid confrontation at all costs. Indian developers may also tend not to ask questions because this is viewed as rude in India. They may even be unwilling to point out errors in a specication that they have been given. To counter these potential obstacles, tier one Indian vendors provide their consultants with assertiveness training and teach them about the necessity of the question-and-answer dialogue, which is critical in situations where the client does not provide rm specs or requirements and where requirements are constantly changing. Companies must make sure the vendors they engage provide foreign consultants with cultural training, often called soft skills training. This soft skills training usually takes the form of a boot camp or a nishing school, as Infosys likes to call its internal soft skills program. Client companies, too, must make sure that internal sta is culturally sensitive to vendor sta. Many companies develop their own one- to two-day cultural sensitivity classes. Some vendors will also provide internal cultural sensitivity training for client sta. Providing internal sta with this training, particularly as it relates to communications, will make a signicant dierence in success of the project. Time Zone Dierences Are A Major Challenge Some software development and maintenance projects are not suitable for oshore development because they require vendor and client sta resources to work together synchronously, they require real-time end user participation, or they require domain expertise only available locally. India is, in the best case (Eastern Daylight Time), 9.5 hours ahead of US-based companies. To get the work done in any of these situations, experts would have to work through time zones, travel long distances, or have their expertise interpreted to make it available to project teams. As such, we do not recommend companies send oshore projects with real-time collaboration requirements.
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Processes Needed To Improve And Standardize Communication Despite widespread English literacy (computer science and engineering are taught only in English in Indian schools and universities), written and oral communication remains a challenge because of the cultural issues referenced above. Processes to improve and standardize communication must be put in place before the relationships starts to ensure proper communications throughout the project life cycle. Scaling Engagements Too Rapidly Is Risky Business Many companies, ush with success an after an initial pilot project, are anxious to reap the maximum benets possible from global sourcing and are ramping up signicantly (e.g., sending more work oshore, increasing project size, increasing oshore expenditure). However, in doing so, some companies are becoming complacent about the risk factors that remain. Organizations seeking to expand their use of global sourcing must understand that it has taken years for industry leaders, such as General Electric or American Express, to realize their ambitions. This risk tends to correlate with the use of Indian vendors because they are the companies with the demonstrated capability to scale. One tendency Forrester has witnessed recently is that units of multidivisional enterprises often feel compelled to rapidly match the outsourcing achievements that other corporate units have already achieved, even if their own experience with outsourcing is next to nil. In such cases, companies are amplifying their risks substantially. Companies must do their due diligence and prepare before scaling existing oshore relationships. The Potential For Political Instability Always Exists Many customers of leading Indian oshore rms were reassured last year by the relaxation of tensions between India and Pakistan after their longstanding disagreements over Kashmir threatened to explode into nuclear conict. However, political instability is very dicult to predict, and stability should not be taken for granted, despite the very strong political and economic forces aligned on keeping the peace. Consequently, organizations pursuing global sourcing strategies with Indian companies should not stint on contingency planning. Companies Must Prepare For Internal And External Backlash Alarmed by the recent erosion in US employment both generally and in the IT sector, a number of local governments are pursuing legislation that would limit the ability of oshore companies including leading Indian companies to perform certain tasks in for certain customers in certain geographies. Press accounts are also taking up the plight of unemployed US IT workers. Already, oshore customers and leading vendors are avoiding
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the use of the term oshore, favoring instead the use of the term global. Is there a potentially signicant backlash in the works? Such a widespread backlash is inherently unpredictable and dicult for any single enterprise customer to inuence. What potential customers should worry about instead is the potential backlash within their own walls. It may seem counterintuitive, but it has become clear that companies fare better when they are open with global sourcing ambitions. Limits On Immigration Have Not Been A Problem Yet Substantial limitations on the ability to transfer personnel into the United States would severely hamper the major Indian oshore rms. However, to this point limits on international travel and immigration have not proven to be a major issue. Customers should, however, request information about how their stang requirements would be met as one of the most signicant aspects of their contingency planning strategy. Vendor Selection Is A Complex Undertaking Most North American customers continue to favor the leading Indian companies in their vendor selection, placing great stock in the size, maturity, and stability of the leading Indian oshore rms. In some cases, organizations have anointed leading Indian rms as their preferred suppliers enterprisewide. While the leading Indian rms are renowned for their verisimilitude, do not take it for granted that a single rm, or group of rms, is sucient to address all possible needs. Try to maintain the ability to engage with other suppliers for special needs when appropriate. THE CURRENT ENVIRONMENT CASE STUDIES Beverage Company A large US beverage company dipped its toe into the oshore waters by contracting with a large Indian provider to do four to ve discrete pilot projects fairly simple Web applications costing about $200,000 each. The cost savings were not spectacular. The company would have paid about $75 per hour for local contractors. IT management wanted to spend between $40 and $50 per hour for the experienced oshore resources but ended up in the high $50s when everything was gured in. The provider assured its client that costs would decrease as the amount of work increased. This wasnt a big project, so there werent any economies of scale, said a manager for the beverage company who worked on the pilot projects. The oshore provider did not put any junior people on the project, a reection of the high hourly rates. We would have to watch this if we ramped up the volume, said the manager.
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Speed was the primary benet of the oshore pilot projects. The beverage company was not able to ramp up its own stang levels in time to meet the sti deadlines stipulated by management; the oshore provider met the deadlines handily. Another advantage was that the providers procedures and quality were better than expected in some cases, better than spelled out in the contract. Customer satisfaction levels were also better than expected 3 to 4.5 out of 5. Project management skills, a common oshore pitfall, were strong. The group we worked with had better project management than we had internally, said the beverage company manager. A few cultural issues cropped up. In several instances, the provider should have pushed back and challenged its clients assumptions or expectations. The necessary feedback was long in coming. It took a while because Indians are very polite, says the manager. Communication in terms of both infrastructure and language issues was a problem at times. There were some issues setting up the links, the usual security stu. We had trouble understanding each other in meetings, said the manager. The arrangement was structured so that the oshore provider placed a few of its people at the companys US headquarters. The company manager would like to see that expanded in any future arrangement. Were a little worried about communication. We would hope that the onshore people could x things and communicate that back to the oshore sta. The downside of this approach: Front-end loading (as the practice of bringing overseas personnel to the US is known) is expensive. Companies have to pay US rates for labor, as well as room and board for the expatriates. The manager reported: The familiarization period got real expensive. We worried about it eating up the savings. Since the pilot projects completion, the beverage company has been evaluating whether to expand its oshore work, and if so, how to do it. It is examining the possibility of sending SAP maintenance oshore. The company has received nancially attractive oers from tier two suppliers trying to establish themselves. The companys next oshore foray may well be more protable than its rst: More second-tier vendors are trying to get into the market, and this is driving the price down, the manager said. Manufacturing Conglomerate Satised with the results of a modest pilot project with one Indian provider, a conglomerate company formed a cross-functional team to evaluate 14 IT outsourcers. The team looked at vendors headquartered both in the US and India. There was no cost advantage to going with the US providers, and as a result, the shortlist comprised four of the largest Indian providers. After lengthy evaluation, the team selected the vendor it had used in its initial oshore pilot, with projected cost savings of about 20% to 40% o onshore labor rates. The Indian vendor is now working both at the corporate and business group levels, though the company elected to start fairly small with about 10 launch projects.
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The new relationship hit its rst snag when the oshore provider had diculty securing the right visas to bring people to the US for project kicko. We didnt hit our start dates for the projects. Were frustrated. There must be a way to get resources there more quickly, said a manager for the US company. Cultural miscues and internal emotional turmoil were two other unwelcome developments. The vendor did not provide training for its sta members who would come to the US. They need to go through some kind of cross-cultural training before coming here. On site, the sta members need to have good communication skills. For example, they need to be able to understand when someone nods yes, said the manager. He agreed that the stereotype of the Indian sta saying yes all the time applied in their case. Currently, some [provider] sta have excellent communication skills and others are dicult to understand. The manager was favorably impressed by the work ethic of the oshore providers sta members. Internally, some of the conglomerates personnel were less than supportive of the oshore arrangement. Some employees do not embrace the idea of oshore and bring up examples of where it has failed. If one thing goes wrong, some people act like someone died. There are negative comments . . . some that can border on harassment. This is a serious issue, said the manager. For companies just beginning the due diligence period prior to getting into oshore, the manager recommends making sure that the vendors background and experience align with your own. Next, look at the quality processes and how they transition development done at headquarters to the oshore location. When speaking with customer references, he advises digging into nitty-gritty issues, such as whether the provider meets deadlines and cost projections. Try to spot the tendency to foist inexperienced sta onto the customer, which has been an ongoing problem for the conglomerate. The number of software defects and bugs has been higher than expected, a major disappointment for the company. Financial Services Company No. 1 A large US nancial services company looked to the oshore option as a way to replace costly local contractors for IT application development work. With diversication of vendors as an overarching goal, it contracted with several Indian companies with expected average labor cost savings of 45%. Last years oshore projects were worth $10 million. The company was recognized for the excellence of its oshore startup program. It created a business infrastructure to support the oshore initiative. The three main areas of due diligence, according to a company manager, were vendor, current project, and infrastructure. Having clearly dened processes upfront laid the foundation for productive relationships with each of the oshore providers with which the company
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had contracted. We documented all processes. Compared to other clients, we did more with documentation. We were more conservative. All information and processes were documented, said the manager. The companys internal and external skills assessment during the due diligence period was extensive. For example, the company had a talent movement program that applied to both onshore and oshore employees. The company aimed to keep individuals in this group employed. If we dont need them in one space, we will put the employee on another project or train them in another eld. This pool has been very successful, said the manager. As is the experience of many oshore clients, the nancial services company found that communication both internal to employees, external to observers, and with the oshore providers sta was an issue to be reckoned with. In addition to creating an oshore communication plan that outlined why it made business sense for the company to go oshore, the company sponsored cultural and communication training. We were very clear about expectations of work hours, holidays, deliverables and acceptance criteria, the need for regular weekly status updates, and the language to be used. The project managers even had checklists that dealt with how to bring someone on-site from the oshore provider, the manager said. The manager advises companies looking into oshore to be very clear about their strategy and what they want to get out of the experience. Vendors can drive you instead of you driving them if you are not sure of your strategy. The vendors come in and soon youre oshoring stu that you had no intention of oshoring. In the end, you dont know how you got to where you are, she says. The best defense against such a morass is to know exactly why you are interested in oshore outsourcing and what your priorities are. The project must have the highest level executive support. Other important advice from the manager: Be very specic. Work orders drive success and the partnership. Leave nothing to assumption. You have to dene upfront how you measure success and the acceptance criteria. Once work starts, there will be too many misunderstandings if it is not dened upfront. Financial Services Company No. 2 This large nancial services companys experiences with oshore IT outsourcing go back to the days of the much-vaunted IT stang shortage at the end of the past century. To ll the gaps in its own skill sets, the company contracted with 27 dierent Indian vendors for small projects. In recent years, it dramatically increased the volume of work owed while reducing the number of vendors to three. Currently, the company spends $20 million to $30 million on oshore outsourcing with savings of approximately $10 million. While
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respectable, this level of savings is far from awesome. Yes, we saved money, but I could have made it up on my stationery budget, said the manager in charge of the oshore relationships for the nancial services company. Winnowing the vendor pool was no small feat. The team consisted of 50 people who took half a year and countless across-the-globe visits to select the vendors: two all-purpose vendors and one niche supplier. Now that the relationship is established, the manager and a few colleagues travel to India twice a year and the oshore providers teams visit the US twice a year. Beyond checking customer references, a best practice is hiring a company that is willing to learn your business, said the manager. Installing the necessary communications infrastructure to the providers in India was a headache. That last mile is still a problem. We use a secure Internet tunnel to get up and running. The amount of eort required for a big company [to establish communications with its oshore vendor] is totally overlooked, said the manager. The companys oshore providers are CMM Level 5 in terms of process maturity, which directly improved its own processes. We have coupled the oshore work with a CMMlevel improvement within the organization, so were learning on their dime while theyre learning on ours. This has been so successful that weve hired some of their people to make CMM work here, said the manager. Project management is frequently cited as the most critical skill on both sides of the oshore relationship. To the manager at this company, however, you have to have both traditional project management prowess coupled with truly exceptional interpersonal skills. You need an evangelist in the beginning, but once youve got the vendor you need somebody to help develop the partnership. The hidden best practice is to nd this special subset of project management, he said. The most overhyped aspect of oshore IT outsourcing, according to the manager, is that its all about cost savings. If youre doing this strictly for the savings, applying the contract-labor model, you will fail. You need to approach oshore holistically. You can get your savings easily and if you have a big enough IT shop thats reason enough to do it but dont forget the intangibles: within budget, on time, with very predictable outcomes, he said. The level of service and attention to detail has been a joy. These are folks who are anxious to do a good job. Its like going to a mom-and-pop shop. This has an entrepreneurial feel to it, as opposed to a big dumb company.
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THE FUTURE OF OFFSHORE IT OUTSOURCING Enterprise Packaged Applications In their eorts to cut costs and improve service levels, more and more North American and European companies are looking to Indian vendors to provide SAP implementation and maintenance support. Outsourcing a packaged application (which is already well known to the vendor and comes with standard documentation, etc.) is certainly much more straightforward than outsourcing the support of an older, undocumented, poorly structured custom system. However, every ERP system is congured to meet the needs of a particular customer and is not a trivial task. How well the system is aligned with the business processes will determine how well the customer is served and will largely govern its return. Therefore, the implementation phases and the tasks within them must be assigned carefully. Most of the Indian vendors have the functional and technical SAP expertise to eectively carry out most of the later implementation phases and all of the support. When they do these phases, the quality is high and the delivery is on time. However, most of the Indian vendors do not have expertise in business process modeling or re-engineering. They also cannot do the work of specifying the system without the direct involvement of the customer. Therefore, the early phases of the implementation must be done onshore and with a consulting organization that has proven business modeling experience, including a select few of the Indian vendors. Projects that are done observing these rules have been successful and saved 30% to 50% of the typical implementation costs. SAP implementations, upgrades and support can be done successfully by Indian vendors using an oshore on-site model. While some of the work related to both new development and maintenance must be done at the clients site, vendors and users are developing processes that allow more work to be done remotely. Why Go Oshore? Companies are interested in using a remote model for a number of reasons. Clearly, the primary driver today is cost reduction. ERP systems are expensive to implement and maintain. Forrester Research indicates that greater than half of ERP installations have cost more than $20 million, and only about 30% of these installations are considered to be more than 75% complete. US-based SAP consultants can cost a company anywhere from $150 to $350 per hour. SAP consultants in India cost $22 to $35 an hour. The savings in labor is enough to pay for the additional overhead remote management incurs and still save companies 30% to 50%.
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The other reasons companies are interested in going remote are often quality, service, and expertise. Indian vendors have distinguished themselves with high-quality processes and deliverables and service-level achievements. In addition, several have phenomenal SAP expertise. These engineers are often certied by SAP, and they have developed their own tools and methodologies just as the former Big Five consultants have. Oshore SAP: Are You Ready? Regardless of the need, all companies are not ready to go oshore. Companies have to pay close attention to the following issues to be successful:
The oshore vendor teams are usually development powerhouses; give them a
specication, and they deliver very quickly. The problem is if they are given a poor specication, they deliver a poor solution that is of high-quality workmanship and does everything that was specied. This is a cultural issue: Indian sta members dislike confrontation and do not want to correct or contradict a client.
Most conguration and custom development issues are not implementation issues,
they are specication issues. In other words, because what was desired was not carefully and fully specied to t the needs of the business when the specications were materialized, the result is unusable. This is more exaggerated in oshore arrangements because there is generally less day-to-day feedback, so there is less chance for course correction. Whatever the task is, the oshore environment needs rigorous upfront specication.
It will be impossible for a vendor to eectively support an SAP implementation from
oshore if the client has not bought into the remote management or implementation model and is unwilling to work within the connes of this model. The model and the process for implementing and supporting from oshore are more rigid than having the SAP sta on-site. Functional specications and change and enhancement requests have to be made formally and to the appropriate person or group. Users can no longer walk down the hall and ask the SAP person to make changes or create a report. Companies that want to outsource the implementation or support of SAP must have some outsourcing maturity or they must rapidly develop this maturity.
SAPs Methodologies As A Reference During the 1990s, SAPs reputation began to suer from implementation issues. Most SAP implementations were being done by third parties with little guidance from SAP. So, in the late 1990s, SAP started developing a methodology for implementing its products. Originally called ASAP, it is now part of the SAP Solution Manager, which also has a
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support methodology. Most of the vendors now use the methodology or a derivative of it. Understanding the methodology is critical to evaluating the oshore vendors and also key to evaluating what work can be done oshore. SAPs methodology denes ve phases for implementation (see Figure 6). 1. The project preparation phase creates the framework for the project. The project denition includes the scope, the personnel, the structure, and the functions of the personnel within the structure. In the context of an oshore project, it is the phase that sets the rules for entire project. It is done entirely at the contracting companys location and includes key project management and the oshore providers on-site representative(s). Preparation is something the Indian vendors have only recently begun to do, and still they often partner with global consultants that tend to perform this part of the project.
Figure 6 SAPs Methodology
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2. The business blueprint phase develops the process alignment. That is, it species in great detail through business scenarios, business processes, and process steps how the SAP system will be congured to conduct the business of the client company. It starts with analysis of the companys current processes and works to clarify how they will work in the context of SAP. It can include business process re-engineering and/or some of SAPs best practices. This phase is also often done by other consultants that specialize in SAP and business process design. It is hard to understand how this can be done oshore, but it is called out in many oshore vendors plans. If a contracting company uses oshore consulting for this, the resulting blueprint must be carefully evaluated to make sure that it represents how the company wants to function. 3. The realization phase makes all the prep work happen in SAP. There are several parts that need to be done on-site, such as organizational change management and the training and documentation plan. However, the bulk of the work, such as authorizations, conguration, customizations, and test setup in CATTS, can be done oshore. 4. The nal preparation is a phase that is often overlooked. It provides for creating the end user documentation and preparing the end users to work in the new environment. It is also the phase for the nal data transfer. This phase has not been emphasized in briengs Forrester analysts have had with vendors. Some oshore vendors do documentation. Again, it must be carefully reviewed, and training must be done onsite. In any case, it is very important to the success of the project. 5. The go live and support phases are also often aided by oshore personnel. When the system will be supported by oshore personnel, the process is even cleaner, since the project turnover is going to people that are often at the same location. There is a lot of oshore skill available for system ramp-up and for system support at all levels. Some oshore companies provide Level 1 help desk support, but levels two and three are usually more appropriate. The Recommended SAP Oshore On-Site Model In an SAP oshore on-site model, the project work is split between the oshore companys on-site consultants and those working oshore. The on-site consultants do the work that can only be done on-site and develop the specications for the work to be done oshore. Depending on the project, project phase, and module, between 0% and 70% can be done oshore. Accordingly, the savings range is from minimal to substantial because on-site labor is considerably more expensive than oshore labor the calculations use an average oshore savings of 40% (see Figure 7).
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Figure 7 SAP Oshore On-Site Model

Figure 7 is only a guide. It is conservative, erring on the side of less risk. Some contracting companies and oshore vendors have pursued more aggressive stances on what to do oshore. The primary guidance is:
Project decisions, especially with respect to business process alignment, should be

made onshore.
Execution of the plan that does not involve end users (training, change management,
etc.) can be done oshore. Top Vendors For Oshore ERP Support Of the top six Indian vendors, Satyam has the most full-time sta dedicated to SAP implementations more than 900. This sta comprises certied engineers and developers, as well as chartered accountants and vertical domain experts. Satyam segments its SAP practice in the following way: implementation, rollout, maintenance support, version migration and enhancement, integration and Web-enabling, new dimension solutions, and Team SAP-Retail. Satyams primary SAP strength is manufacturing, but it is also strong in the retail, automotive, and energy industries. In addition, Satyam has a strong relationship with SAP in Germany and India, where it participates in some product development and testing initiatives with SAP. Wipro is the second largest Indian vendor by revenue. Wipro delivers its SAP services out of its Enterprise Application Services business unit (see Figure 8). This group also delivers PeopleSoft, Oracle, and Siebel skills. SAP was Wipros rst ERP oering. The practice started in late 1998, and by 1999, Wipro had about 25 consultants in the practice. In 2000, Wipros SAP practice began to grow rapidly due primarily to customer demand.
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Figure 8 Wipros SAP Services
Wipro does implementations, upgrades, and ongoing maintenance and support. Wipro also provides Level 2 and Level 3 help desk support for many of its SAP maintenance customers. Twelve percent of Wipros revenues in the SAP arena come from pre-implementation work, which is high for an Indian vendor, since it typically derives its revenue from the latter implementation phases. Fifty-six percent of the revenues come from implementation work (including new products and upgrades), and 32% of revenues come from ongoing support revenues. Wipro has an extremely strong SAP energy and utilities practice and the strongest telecomm experience of any of the Indian vendors. It has done end-to-end implementations for both Transco and BP. Wipro has also done SAP work in the following verticals: banking, nancial services, and insurance (BFSI); manufacturing; and retail. Current customers include Gillette, Putnam Investments, Sanyo, APAC, and BP UK. Wipro has experience across various SAP products: R/3, mySAP, APO, CRM, BW, and enterprise portals. Before engaging with Wipro for discrete SAP product implementation or support, companies should make sure they get references for similar projects. Just because a Wipro team has done an R/3 implementation doesnt mean it has experience in enterprise portals. TCS is the largest Indian IT services vendor today. TCS started with ABAP programming in 1998. By 2000, TCS had moved into the SAP implementation business. TCS soon realized that in order to provide the higher level SAP expertise, it needed to hire SAP consultants from out of the former Big Five. Former Ernst & Young SAP consultants lead the SAP practice today.
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TCS SAP expertise is concentrated in the following verticals: oil and gas, manufacturing, chemicals, and utilities. It uses a customized version of the ASAP methodology, which it calls the Enterprise Transformation Methodology. TCS has its own templates and tools to help accelerate the implementation and upgrade process. TCS developed excellent SAP help desk experience when SAP outsourced its help desk to TCS when it rst opened in India. TCS supported 90 SAP customers until SAP could develop the expertise in India to take over its own help desk operations. TCS has done several SAP implementations entirely on its own. It also often partners with rms like Accenture that do the process mapping and improvement work, and then TCS takes over the latter implementation phases. Prospective clients should ask TCS for references relevant to the particular way they wish to use TCS. TCS clients include GE Silicones, Chevron Texaco, Agilent, Siemens ICN, Gillette Europe, and Transco-UK. The company segments its SAP services as many of the other vendors do (see Figure 9). Larsen and Toubro Infotech (L&T) was the rst Indian IT organization to implement SAP. Subsequently, L&T commercialized its IT organization in 1997, forming L&T Infotech. Not surprisingly, L&T has its strongest vertical expertise in the engineering and manufacturing, but it also has a strong nancial expertise. L&T has 2,200 consultants with 450 dedicated to SAP. This is much smaller than Wipro, TCS, or Satyam. However, its SAP skills are as strong or stronger than its competitors because it has been doing SAP work longer than any Indian vendor. In addition, L&T distinguishes itself by having strong mainframe expertise. L&T has seven development centers throughout India and nine smaller development centers in the US. One Indian and one US development center are fully dedicated to SAP.
Figure 9 TCS SAP Services
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L&T has yet to invest in or develop business process consulting expertise needed for the early implementation phases. Thus, while L&T is a top choice for the design, implementation, and support of an SAP system, it is not a good choice for preimplementation work. L&T often partners with vendors like Accenture and IBM Global Services to do the business process work, including the requirements gathering and most tasks up to the blueprinting. L&T has developed a methodology called SAP-ERA and tools to expedite the implementation and upgrade process. Its zoom-up tool is particularly useful for facilitating upgrades on highly customized systems. In addition to its methodology and tools, L&T focuses on the outsourcing maturity level of clients. It realizes that if the client organization is not mature enough, there is very little that can eectively be done oshore. L&T has an SAP technical help desk support for the clients that it supports. It concentrates on Level 2 and Level 3 support, leaving Level 1 support to other Indian call centers that are more focused on call center activities than technical support activities. L&Ts clients include PSE&G, Suzuki, Bristol Myers Squibb, John Deere, Gillette, and Motorola. Intelligroup (ITIG) is a publicly traded US-based vendor with a strong Indian presence. Despite the fact that it was founded in Edison, N.J., in 1995, it is often classied as an Indian vendor. ITIG is also often considered an SAP boutique, although it does oer other application development and management services, including Oracle and PeopleSoft services. However, its strong suit today is clearly SAP it has many blue-chip SAP clients, and 61% of its revenues come from SAP work. Despite its small size, ITIG is able to compete with the top-tier Indian and US vendors because of its SAP strength. It has 900 SAP consultants (700 oshore, 200 in the US), putting its SAP headcount on par with vendors 10 times its size. Its most developed vertical expertise is in high-tech, consumer packaged goods, chemicals, mining, life sciences, and the public sector. ITIG has developed a suite of proprietary tools for SAP implementations, upgrades, and support. ITIG has focused more on productizing these tools than most of the other vendors. It also has a very interesting knowledge management (KM) tool called myAdvisor that delivers information to individual clients about their implementation. The tool captures domain and business process knowledge as well as knowledge about the design and customization of the system. This tool is especially valuable for clients that want to co-source their SAP implementation with ITIG or for those that are going to support the implementation internally after ITIG nishes the project. ITIG clients include ExxonMobil, Procter & Gamble, Coca-Cola, Westinghouse, and Kodak. Again, ITIG is not the vendor to hire for pre-implementation requirements gathering and business process mapping. However, once that work has been done, ITIG is a top choice for SAP implementation and support.
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Patni is a lesser known, smaller, top-tier Indian vendor with about 6,200 employees worldwide. Patnis ERP focus extends to Oracle, Baan, PeopleSoft, Siebel, J.D. Edwards, and SAP. In the SAP arena, Patnis focus is on SAP support and new dimension products rather than on R/3 implementations. Still, it has very strong SAP technical and support skills and referenceable clients, such as Bose, Pitney Bowes, McCormick, and Gillette. While Patnis entire Enterprise Application Services group is today only at 550 consultants, Patni plans to grow its SAP group to 500 people by the end of 2004. Recommendations Business process improvement should be an integral part of any SAP implementation. Companies that dont take this opportunity to optimize their processes before mapping the software cannot take advantage of the process cost reduction that a package like SAP can enable. In general, dont use the Indian vendors for the project preparation and business blueprint phases. These phases require signicant business process expertise, and the Indian vendors do not usually have the requisite experience. Use global SAP implementation partners for the project preparation and business blueprint phases. Use Indian vendors for the following phases: realization, nal preparation, go live, and support. The work is on time with high quality at low cost. Dont go oshore unless the contracting company has a strong project management discipline. Dont go oshore if the project requirements are fuzzy because your organization will get exactly what has been specied. Obtain references when considering an Indian vendor for pre-implementation work. Get references from the vendor for similar work performed and from the specic vendor consultants who worked on the project. Vendors with this expertise have hired management consultants from SAP Global Implementation Partners like Accenture and IBM/PricewaterhouseCoopers. IT Infrastructure Encouraged by their successful eorts in oshore outsourcing applications development and maintenance, some North American and European companies are beginning to look to oshore vendors to help them cut costs and improve productivity on the infrastructure side as well. In response to this demand and in an eort to increase the breadth of services
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they oer, oshore rms, primarily in India, are now oering an array of non-application related services, including infrastructure outsourcing and operations management services. While many of the infrastructure services on oer may be eectively delivered remotely (many services are delivered remotely today by both traditional tier one IT operations outsourcers and internal IT departments), the Indian IT services vendors have yet to develop the level of expertise and the full complement of skills necessary to support Global 2,000 clients full infrastructure outsourcing needs. Moreover, the expense contribution of labor to total expense (labor expense plus other expense plus capital depreciation) for IT operations is signicantly less than that for the application development and maintenance function. This implies that the potential cost savings derived from oshore infrastructure outsourcing will be signicantly below those realized by oshore outsourcing of application development functions. The prospect of increased operational risk and relatively modest potential expense reduction promised by such arrangements will limit their market appeal in the near term. Over the longer term, current tier one infrastructure outsourcers will be forced to address skill/service rate disparities compared to oshore alternatives. If they fail to do so, edgling oshore providers will rapidly capture enough talent and experience to join the ranks of the tier one providers themselves. The Remote Aspect Of Oshore Support Isnt The Issue As companies look to their Indian outsourcers to provide an ever-increasing and diverse portfolio of IT services, they are looking for them to provide support for their infrastructure needs, and the Indian vendors are scrambling to accommodate. While some cynics doubt that infrastructure can be managed from India, Forrester is not necessarily concerned with the remote support aspect of oshore infrastructure outsourcing. In traditional domestic strategic IT outsourcing with organizations like IGS, EDS, CSC, and others, the user of remote support services is quite common. However, to be clear, remote in this context usually implies regional or, at a maximum, intracontinental distances. One of the obvious conclusions here is that if you are more than two years into a strategic outsourcing relationship, you are already involved with some level of remote infrastructure support. You may not be aware of it, but it is most likely occurring. Another conclusion is that for at least the rst few years, the great savings that Indian vendors deliver in the applications area through labor arbitrage are not possible because the vendor must continue to employ client sta for the sake of business continuity and also because the Indian vendors need to learn from this sta because they havent developed state-of-the-art processes for supporting infrastructure yet.
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Finally, it is clear that, while some resources have to be collocated with the infrastructure, in most organizations, between 70% and 80% of operations support can be done from a remote location, if the vendor and the client choose to do so. So Why Not IT Infrastructure Support From India? First of all, Indian vendors have done applications outsourcing and development for many years. Over time, they have developed the highest-quality, mature processes for applications support. As a result, Indian application labor is not only less expensive, but Indian application resources are much more productive and ecient than internal sta or domestic outsourcers that lack their devotion to process. On the infrastructure side, however, the Indian vendors do not yet have this experience. Unlike the global systems integrators (e.g., IBM, EDS, CSC), they have not spent years perfecting their infrastructure outsourcing models and methodologies in order to streamline the infrastructure and support it more eciently. So, while companies may realize cost savings by using less expensive labor to support some components of their infrastructure, their service levels may suer until the Indian vendors perfect their models. Second, Indian vendors today simply and admittedly do not have the full complement of skills to support Global 2,000 clients full infrastructure needs. They have some strong service capabilities (e.g., desktop management, Windows and Unix server management, remote monitoring skills) but are not appropriate for assuming a general contractor role for infrastructure outsourcing. This means that companies that directly employ Indians to support discrete infrastructure components will have to deal with fragmentation of responsibility and accountability issues (in other words, nger-pointing and the associated service interruption that this can cause), as they would in any out-tasking structure where they assume the dicult role of general contractor. Even in cases where Indian vendors are providing more substantial infrastructure support services, they are typically doing so alongside a tier one infrastructure outsourcing rm, such as IBM, EDS, or CSC. The client typically assumes a general contractor role and out-tasks discrete support functions to the individual vendors. Also, in terms of mainframe data center outsourcing, Indian vendors have at best limited exposure to mainframe operations. The 1977 nationalization of industry resulted in IBM withdrawing virtually 100% of IT infrastructure assets from India, which, in tandem with interim political instability, has resulted in the paltry installed base for which India-based rms have had to act as a training ground. Thus, not surprisingly, the largest of the Indian IT services provider, TCS, has just 1,100 MIPS-plus of mainframe capacity. Finally, in the few instances where the vendor manages the bulk of the clients infrastructure, the work is done wholly on-site using vendor and rebadged client sta. For
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example, the Scottish Parliament uses Wipro to support its operations; however, this is done by Wipro sta at the client location. Similarly, TCS supports the bulk of Charleston Countys infrastructure, but it is all done using TCS resources at the client location. Although it is possible, neither client wishes to support any part of their infrastructure from India. Having the resources on-site reduces the clients risk, but it also substantially reduces their savings since Indian vendors are supposed to pay sta working on-site prevailing wages. The bottom line is that the oshore providers, on the whole, do not have the expertise to assume a prime contractor role for Global 2,000 IT organizations and certainly do not have any credible set of reference successes in this area. When discussing infrastructure outsourcing with oshore rms, get specic denitions of the engagements and terminology in use. Outsourcing a call center may be considered infrastructure to some but not to the data center function. Cost Savings On The Infrastructure Side While tier one global outsourcers make money on infrastructure outsourcing through standards, processes, systems management technologies, state-of-the-art reference architectures, and economies of skill in the labor pool, Indian vendors have the ability to reduce infrastructure costs additionally through labor arbitrage. Since they dont have the mature processes in place or a track record here, they need labor savings to deliver a value proposition to the client. Given the on-site and internal client sta requirements and the lack of experience, clients can expect to save in the 20% range for infrastructure-related services. When the Indian vendors can deliver services that are as mature as the tier one outsourcers (which they are likely to be able to do in the next three to ve years through organic growth and acquisitions), then the savings potential will be quite large likely in the same range as the applications development and maintenance area 25% to 50%. Indian vendors typically charge for infrastructure services based on labor resources. Costs to support infrastructure components oshore typically range from $17 per hour to $28 per hour. Costs to support infrastructure components on-site will vary by company and by vendor. Rebadged client sta will maintain their salaries, although the client will now pay a premium on top of this salary for the outsourcers prot. On-site Indian sta will cost between $55 and $80 per hour. Clearly, the more work that can be done from India, the more the client saves. In general, overall dollars saved on the infrastructure side will be less than on the applications side because the application development and maintenance is typically more labor-intensive.
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What Services Can Be Safely Delivered By Indian Vendors? First of all, although Forrester does not recommend fragmenting the infrastructure, there are services that can be carved o and delivered by Indian vendors very successfully (see Figure 10). Which Vendors Are Appropriate For Infrastructure Outsourcing? Vendors in the oshore infrastructure outsourcing market are there because clients have asked them to be there. Clients are eager to use Indian resources for more and dierent tasks. Indian vendors are learning from their clients and providing services as they can. They have been reluctant to do things like acquire assets from clients, but some of the vendors report that they may begin to this, as the tier one outsourcers sometimes do, in the near future. For now, companies should consider some Indian vendors to be appropriate for some managed services, but not for end-to-end infrastructure outsourcing.
Figure 10 Services That Indian Vendors Can And Cannot Successfully Deliver

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In 1993, TCS began to do systems integration projects for Indian clients. Soon after, TCS began to do other SI and infrastructure support work for clients in India. In the late 1990s and early 2000, existing oshore applications outsourcing clients, such as GE Capital Fleet Services Europe, began to look to TCS for infrastructure-related support. Today, in conjunction with CSC, TCS provides GE Capital Fleet Services with end-to-end infrastructure support services. TCS portion of the deal is related to Unix and Windows server management, network management, desktop and help desk management, and messaging support. Seventy-ve percent of this support is delivered from India. Today, TCS derives less than 5% of its revenue from infrastructure-related engagements. Of its almost 18,000 strong workforce, 900 are dedicated to infrastructure-related support. In addition, TCS has access to 1,100 (100 of which are fully dedicated to TCS customers) sta from its acquisition of CMC Corp, a domestic Indian infrastructure management company that it acquired in 2001. In addition, TCS is part of a joint venture called Intelenet, which provides help desk services to TCS clients. While TCS clearly does not have a large infrastructure outsourcing business, it does, like Satyam and Wipro, consider infrastructure outsourcing to be a key strategic initiative going forward. It plans to increase its infrastructure sta to 6,000 within three years and to increase the percentage of infrastructure work done oshore to 50%. Today, TCS core service oerings in the infrastructure space are:
System programming. DBA services. Database tuning. Applications monitoring. Network monitoring. System software support. System management.
Wipro Infotech, a subsidiary of Wipro Technologies, has been doing infrastructure support for Indian clients for about 20 years. For the past four years, Wipro Technologies, the second largest IT service provider in India, has been providing infrastructure support to oshore clients, often with the help of Wipro Infotech. Today, 8% of Wipros revenues come from infrastructure-related services, and Wipro has 610 people dedicated to this practice.
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One of Wipros key infrastructure clients is Thames Water, A UK-based water and waste services company. Wipro remotely manages 350 heterogeneous servers, 3,200 network elements, and 44 databases spread across 118 locations in UK and Ireland and ensures 99.95% availability for Thames. Wipro provides 24x7 services from its NOC in India. This is one of the biggest deals for an Indian company in the infrastructure space. A team of approximately 40 sta (10 on-site and 30 oshore) provides the services. Wipro currently has no mainframe management skills, but it is planning to build mainframe operations expertise. Wipro excels in infrastructure consulting projects. Following are services that Wipro oers in its infrastructure practice. Note that many of these services are project services rather than outsourcing services:
Infrastructure consulting and integration. IT infrastructure security (architecting and managing security for online application
and transaction environments).
Managed services (monitoring, admin, and diagnostics). Telecom infrastructure services (Wipro has extremely strong telecom expertise
the best in India). Satyam is one of the top ve consulting and outsourcing rms in India today. Its core business is application development and maintenance, but it has made inroads in the infrastructure management space. Satyam has about 400 resources dedicated to delivering managed services, and it also has a very strong referenceable infrastructure management client list. Unlike the other vendors in this section, Satyam has taken over (bought) client assets through infrastructure outsourcing deals. Satyam bought TRWs North America Global Delivery Center in Cleveland, Ohio, including all assets. Out of this facility (27 people) and remotely from Hyderabad (ve people), Satyam supports the applications (SAP, PeopleSoft, and a T&E application) and the infrastructure to service 65,000 users. Satyam plans to add more customers with similar requirements and infrastructure needs to this center at some point. Satyam has no mainframe expertise, either, but it does have strong Unix, Windows, and Linux expertise. It also oers the standard portfolio of managed services including:
System programming. DBA services.
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Network monitoring and management. Application monitoring and management. System software support. System management. Stress testing.
Satyam views the oering of infrastructure services as extremely strategic. Clients should expect Satyams practice in this area to grow substantially during the next 18 months. Still, clients must demand references for specic skills before engaging with Satyam for infrastructure services. Recommendations Organizations willing to assume the role of general contractor and ultimate responsibility for IT service levels can exploit the availability of skilled, competitively priced operational support services in select areas from oshore providers. Based on current market conditions, this should be considered an aggressive expense management strategy. Only those willing to accept early-mover risk levels should consider engaging in strategic IT infrastructure outsourcing relationships with oshore providers, at least until these providers build a larger resource/skill base and can demonstrate a history of successful engagements. Those organizations interested in the risk/return proposition described above should initiate discussions with leading oshore vendors like TCS, Satyam, and Wipro. Other companies should defer oshore infrastructure outsourcing alternatives until a reasonable body of reference engagements is established. Since the current skill base in the oshore support market is not yet capable of holistic operations outsourcing, prospective clients must make an investment in skills discovery to determine vendor competency in specic areas. Senior technical and support sta members should be involved in such qualication eorts as subject matter experts. Organizations considering selective outsourcing of operations support functions to multiple providers must consider the incremental risk involved in doing so. Fragmentation of direct IT support functions can confuse perceptions of responsibility and accountability and result in degraded service levels. This basic concern also applies when core operations functions are split among multiple service providers, even if they are provided remotely
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or locally by domestic providers, but the risk in increased when support functions are separated by many time zones and perhaps communication issues. Due to the relative immaturity of oshore providers in this particular market space, wellestablished contract terms do not yet exist. Organizations electing to exploit the availability of oshore operational support services should expect to invest considerable time in specic denitions of tasks, responsibilities, and SLAs. Help Desk The recent decision by Dell to transfer support for its OptiPlex desktops and Latitude notebook computers for corporate customers from Bangalore back to the United States and Lehman Brothers similar decision to transfer oshore technical help desk services back in-house underscore the challenge of oering technical help desk services from oshore locations. In both cases, the location was India. However, despite this setback, the use of oshore technical support is growing, as is strategic outsourcing. India leads the charge here. Indian suppliers are pursuing help desk opportunities as part of their drive into IT infrastructure management, while major global outsourcers seek to increase the use of low-cost labor for a variety of tasks, including help desk services to reduce their cost bases. Regardless of the approach, customers must exercise signicant care outsourcing technical help desks to India and elsewhere and closely monitor customer satisfaction and interaction quality to identify and correct problems quickly. Many organizations are seeking every opportunity to cut costs. For many, this entails outsourcing a growing range of IT activities. As North American customers are more comfortable with oshore outsourcing, they are considering a broader range of services from oshore suppliers. One of these is technical help desk service. Several companies recently issued requests for proposals (RFPs) for large, global help desks with the explicit goal to incorporate oshore resources into the help desk process. Although outsourcing the technical help desk is risky particularly if it involves oshore resources the market for outsourced oshore technical help desk services is poised for signicant growth. However, the market for oshore technical help desk services, as opposed to the market for oshore call center services, remains immature. This was underscored recently by Dells decision to bring technical support for US corporate customers back to the US after a series of customer complaints, and a decision by Lehman Brothers to bring its oshore technical help desk back in-house. Nevertheless, the undeniable economics and irreversible momentum toward oshore outsourcing will lead many companies to consider outsourcing their technical help desk oshore, despite the travails of Dell and Lehman Brothers.
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Still, signicant challenges remain. Requirements for technical help desk are similar to, but not the same as those for call center applications. The technical help desk is largely reactive and responds to inbound customer phone calls and emails, while the typical call center is outbound in orientation. Technical help desk processes also entail custom elements, reecting the unique combination of infrastructure, tools, and processes in place at a particular client site. Moreover, the technical ability required for technical help desk services is greater than that required for call center tasks, including problem diagnostic abilities, which complicate training and career path issues. Enterprise technical help desk is also more challenging than external customer technical support, in which companies use resources from India and elsewhere to provide technical support for a range of products to both consumers and corporate customers. However, the requirements are more similar than those of the outward-bound call center. Early attempts to oer oshore outsourced help desk and customer technical support services from India experienced disappointing results, including poor call-resolution times and relatively low customer satisfaction levels. The reason for these disappointing results appears to be inadequate preparation for accent neutralization, inadequate time and eort for transition (including poor knowledge transfer and process synchronization), and bad expectations management. Dell is neither the rst nor is likely to be the last company to experience frustration with outsourcing technical support to India and revert back to domestic sources. However, Dells experience is more failed expectations management than proof that technical help desks cannot be outsourced oshore. In fact, various help desk and customer support activities can be successfully outsourced to India and elsewhere if the appropriate processes are in place. Why India? Outsourced oshore technical help desk services are available from a variety of suppliers in various geographies. As is true for application development and maintenance services, India oers an attractive combination of low labor costs, English-language competency, and an impressive range of technical skills. Although other locations, including the Philippines, South Africa, Ireland, Malaysia, and New Zealand oer good English-language capability and attractive labor rates (excepting Ireland), the scale of these locations as a source of qualied labor is far lower than that of India. Moreover, Indians predilection for process rigor makes it a strong candidate for technical help desk applications. Leading Indian vendors have accumulated technical help desk work from customers of application development and maintenance services, or emerging IT infrastructure management services in which their remote monitoring and management capabilities are key enablers. However, they are becoming more and more interested in discrete help desk
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outsourcing deals, which have begun to appear in the form of customer-issued RFPs. Most major Indian outsourcing suppliers can point to at least a handful of discrete help desk outsourcing relationships, often with pioneers in oshore outsourcing, including Wall Street rms. Customers with signicant English-language requirements should consider India along with the other countries. Global enterprises with diverse language requirements should evaluate alternative locations, along with large global outsourcers that possess geographically diverse help desk resources. What is behind the trend toward outsourcing technical help desk oshore?
Cost savings for technical help desk. The desire to cut costs is a signicant driver for
outsourcing technical help desk oshore, just as it is in application development and maintenance. However, technical help desk sta tends to be signicantly smaller than application development and maintenance sta, which limits potential cost savings. In this way, technical help desk is not as large an opportunity as call-center-oriented BPO and is unlikely to justify a captive operation for any but the largest help desk operations. Also, unlike application development and maintenance, technical help desk requires relatively high on-site eort, at least 20% in most cases. However, the savings can still be signicant for large help desks in multinational and global rms. Indian help desk agents are paid on average between $10 and $17 per hour, as much as 50% to 60% less than comparable US agents.
Cost savings for customer technical support. Prot margins for high tech companies,
especially for consumer products such as consumer electronics, make it dicult to perform product technical support in-house. A single question on a low-end product can erode or eliminate prot from the sale. Lowering the per-call cost to support external customers by outsourcing to an oshore location can easily impact operating prot. Customers that receive free support for consumer packaged technical products are less sensitive to slightly lower service levels than business customers, who pay for a level of service and expect it, with an annual maintenance contract renewal in the balance.
Extended support. Many help desks are staed for normal working hours, with little
provision for o-hours support. Just as customers of Indian application development and maintenance services benet from staging work around the clock, work during the US-based customers day can be transferred to the outsourcer location for development overnight (from the US perspective).
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Challenges Of Oshore Outsourcing The Technical Help Desk Outsourcing the technical help desk presents signicant challenges, including:
Voice, accent, and behavior. The largest barrier to successful oshore help desk
services (in India, at least) is diculty with accent, voice intonation, and behavior. Accent tends to be more of an issue in spontaneous, nonscripted conversational settings, such as technical help desk support. Rate of speech may also increase during stressful help desk calls, exacerbating accent tendencies. Eective voice modulation, pronunciation, and pitch are also important to a successful technical help desk. Comprehensive accent-neutralization eorts, voice training, and behavioral training are crucial to successful help desk services in the Indian context.
Knowledge transfer. The key to overcoming geographic distance and lingering accent
and cultural issues is knowledge of customers and their environment, so agents have a context with which to diagnose a callers problem. With the customer demographic and environmental data at the agents ngertips, agents can solve problems faster and ask fewer questions. This knowledge transfer is a critical aspect of the transition stage. Without it, resolution times take too long for typical North American customers to tolerate. Accent neutralization is much less of a challenge in other English-speaking countries like Canada, Ireland, the Philippines, and South Africa.
Culture. Customers of Indian oshore application development and maintenance
services have learned to address cultural dierences between US sta and Indian sta. In the help desk context, these dierences can take the form of interactions that appear awkward and intolerably lengthy. US customers in particular may chafe at help desk calls in which agents simply repeat a question. Here, the very thoroughness and process awareness of the typical Indian help desk agent can work against them. Customers that use Indian oshore help desk services should review existing help desk scripts for accuracy and completeness, because Indian help desk agents tend to follow them to a fault. Accent neutralization training is critical, so help desk agents can execute scripts eectively.
Transition. Transition of technical help desk services can be complex and challenging.
For best results, the help desk provider must be familiar with the procedures, processes for trouble ticketing and workow, and tools of the customer. The better these are documented, the faster the transition process can be completed. Eective synchronization of processes is complicated by dierent tool sets. Most Indian companies report that this entire process (including accent neutralization training) can occur within 30 to 60 days, occasionally as few as 15 or as many as 90. Large outsourcers tend to proceed more cautiously, in some cases extending the process past 100 days.
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Stang and attrition. Attrition is a grave concern in Indias services sector and in the
Philippines, where high attrition rates hold sway despite the fact that workers in lowcost geographies often consider these jobs desirable, long-term positions. Technical help desk positions are harder to sta than call center positions because of the higher degree of technical skill required (as well as English language skills and an acceptable accent) and troubleshooting ability. This creates challenges for managing career paths. Indian rms recognize that technical help desk is not a career endpoint likely to appeal to highly qualied technical personnel. They try to provide career paths for help desk personnel in terms of competency development, to help them transition into application development and IT infrastructure management roles. Most Indian rms are in a quandary about organizing for technical help desk services. The physical call center infrastructure tempts them to oer technical help desk services from call-centeroriented BPO subsidiaries, but the technical skills and career paths are more consistent with their application development, maintenance, and IT infrastructure management activities. Still, composite IT BPO players have more wherewithal to juggle career paths and technical skill sets than purely call-center-oriented BPO players.
Customer satisfaction. For large IT organizations and outsourcing providers, the
help desk is a key channel with signicant implications for customer satisfaction. One way to guard against poor customer satisfaction is to overcompensate with additional manpower, at least initially, despite the price of initial cost savings. Companies must monitor customer satisfaction through after-call interactive voice response or email satisfaction surveys to see how satisfaction is aected.
Expectations management. The SLA is a contract between IT and its employees, or a
company and its customers, for the level of service they will receive when they need assistance with a problem. The SLA outlines response and resolution times for various dened categories of problems. The terms of the SLA are included in the outsourcing contract, and the outsourcer will provide operational metrics to show performance against SLAs. It is critical that the SLA is actively communicated to customers, especially if service levels have changed from previous SLAs. Setting realistic expectations with customers avoids complaints resulting from overly high expectations.
Productivity. Although experience is still limited, evidence suggests productivity at
Indian oshore outsourcing help desk sites lags in terms of initial productivity by about 10% to 20% in terms of call per-agent per-hour productivity versus US sites (assuming knowledge transfer and process synchronization are successful). This is primarily due to longer time per-call for communications, behavioral, and process reasons (if the calls are longer, the number of calls per-hour per-agent, a typical productivity metric, will be lower). However, there is no signicant reason why oshore help desks
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cannot approximate or even exceed the performance of oshore help desks over time, particularly if help desk processes are optimized.
Telecommunications and call switching. An outsourced help desk relies on an
integrated, multichannel communications platform, including adequate telephony infrastructure to support agent screen pop when calls are transferred from internal to outsourced agents, or from department to department oshore. Without enough attention to infrastructure, it is hard to coordinate queuing, routing, data transfer, and metrics tracking with multiple geographically distributed call centers.
Key Steps Transitioning To The Oshore Supplier Eective transition strategies are critical in outsourcing anything, but oshore technical help desk poses special challenges. To ensure eective transfer of help desk processes, pay close attention to the following:
Agent training. The principal focus of new agent training in India is accent
neutralization. A second major focus concerns cultural training to stress eective business communications and cultural information about geographic regions agents are likely to serve. This entails the same kind of cultural acclimation (e.g., slang phrases, local sports teams) also seen in the technical support arena. Another dimension is developing cultural anity in terms of behavior. For example, agents that serve US customers are trained not to repeat questions, which is a natural behavior for Indian nationals but could be objectionable to US customers. A third focus is likely to be generic training in the suppliers help desk processes (independent of customerspecic processes). Relatively little time is spent on technical training: new agents are assumed to have relevant certications (e.g., MCSE, CNNA) and are likely to be hired on that basis. However, they may need some training and role-playing in diagnosis and problem-solving skills. Several Indian vendors provide help desk agents with competency development plans to guide their career planning. On average, agent training in India takes between two and three weeks.
Customer-specic training and knowledge transfer. Sometimes referred to as the
knowledge absorption phase, customer-specic training is properly thought of as part of the transition process. This process concerns evaluating the specic nature of the tools, processes, problems, and issues that are encountered at the customer environment. In many organizations, help desk processes are poorly documented, and help desks operate largely by tacit knowledge. Documentation of this knowledge is a critical part of knowledge transfer. This process can vary signicantly in terms of time required, ranging from as little as two or three weeks to four to six weeks or longer.
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It may also involve visits to the oshore facility and visits from the oshore supplier to the customer location. Some suppliers embrace a train the trainers approach.
Customer support process denition. Dening the ow of customer interactions
from Level 1 to Level 2 and beyond denes the role of the outsourcer, and to some degree the agent skill level required. For outsourced technical help desk, the outsourcer may handle Level 1 and transfer more complex issues or issues that require onsite assistance back to the companys IT help desk. In this case, clearly dening the scope of Level 1 and the expectations for rst-call resolution and escalation rates are crucial to an eective transition. For outsourced customer technical support, an upfront understanding of the escalation paths for warranty problems, new bugs or enhancement requests, or dierentiated treatment for priority customers drives much of agent training.
Integration with customer information and knowledge tools. On the technology
side, customer contact information, purchase history, and warranty records are either loaded into the outsourcers CRM system, or more commonly, outsourced agents access the companys internal CRM deployment to identify customers and perform entitlement. Call scripts are developed to lead agents through customer identication and program diagnosis. For product technical support, outsourced agents can also access any searchable knowledge repositories created by the company for supported products. An outsourced IT help desk may rely on an existing repository of desktop hardware and software problems and solutions.
Pilot. Major suppliers typically schedule some sort of pilot program prior to going
fully live with the complete range of intended services. This may involve a subset of problems with limited geographic scope or simply a portion of the workload. For Indian companies, it may entail using more resources on the customer site initially and later transferring more work oshore. For outsourcing companies, this may entail some of the load-shifting strategies described above. Addressing these issues adroitly is crucial if a negative impact to SLA targets and customer satisfaction are to be avoided.
Eective Staging Strategies Minimize Risk As is true of oshore application development and maintenance, oshore outsourcing the technical help desk is not an all-or-nothing proposition. Indian oshore companies and leading outsourcing companies that use oshore resources for help desk typically reduce risk by splitting the workload. This can be achieved in the following ways:
Work is randomly split between geographies in case of an outage in one of the

geographies. Large outsourcers typically have call centers for help desk support
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in various locations across the globe. These centers are typically amassed through successive outsourcing transactions. EDS, for example, prefers to support roughly half of the its Level 1 support calls from India and half from North America to ensure stability in the event of a problem with calls in and out of India. This is no idle worry: During 2003, EDS lost access to its Indian facility due to a terrorist explosion. Work was shifted seamlessly to Canada. Then, a major power outage in North America knocked out the Canadian center, necessitating the transition back to India.
Work is split and shifted to work through time zones. Generally referred to as
follow-the-sun support, US call centers answer questions during US daytime hours, and nighttime calls are routed to Indian centers during its daytime hours. For example, for certain clients, one large outsourcer uses its call center in the Midwest for the 12hour daytime shift and its call center in Bangalore for the 12-hour evening shift.
Work is split between geographies based on its level of complexity or peak-hour
requirements. Highly technical questions can go to a US-based call center, whereas Level 1 requests like password resets are routed to an oshore location. In some cases, the complex Level 2 and Level 3 questions go to the oshore supplier, while Level 1 inquires go to a lower-level help desk in the US. Another approach is to stage work on peak versus nonpeak hours. In practice, customers embrace dierent combinations based on their specic requirements and preferences.
Work is split based on customer demographics. Calls from premium customers
(based on customer number, purchased level of service, perceived value, or other criteria) are routed to a local call center, and less important customer calls are routed to India or the Philippines.
Help Desk Activities Of Leading Indian Companies Leading Indian vendors view technical help desk and technical product support as a natural complement to their existing applications development and maintenance and IT infrastructure management services. In some cases, these vendors oer technical help desk services out of their call-center-oriented BPO subsidiaries. In other cases, IT infrastructure services are aligned with IT infrastructure management service oerings. Although the majority of technical help desk work performed by these companies is embedded into broader service oerings, the amount of discrete technical help desk activity is growing. Although technical help desk is not as broad an opportunity as call center, billing rates (and potential protability) are higher and it can be readily sold as an add-on to established services.
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Among the major Indian rms, patterns vary. Some oer Level 1 help desk services through BPO subsidiaries (otherwise engaged with call center), while others oer them through IT infrastructure management units. Some customers look to the Indian companies for their Level 2 and Level 3 requirements, while others retain the higher levels and outsource only Level 1. In some cases, the Indian companies are becoming sophisticated in provisioning technical help desk services and are capable of leveraging specic personnel across dierent customers or leveraging personnel across dierent competency categories. Most leading Indian companies are making technical help desk a key element of their ITenabled services strategies (see Figure 11).
Figure 11 Technical Help Desk And Support Services: Selected Indian Oshore Vendors

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EDS Gets Oshore Technical Help Desk Right EDS, like most global outsourcers, is in the midst of a transition in which resources either acquired or built up to serve individual customers on a one-to-one basis are now being consolidated into shared services structures that serve multiple customers across dierent geographic domains. This transition is being pursued across a wide variety of service types, including application development and maintenance but also call center outsourcing and help desk support. While outsourcers in the past have preferred to keep technical help desk support close to the ultimate customer, the signicant opportunity for labor-savings provided by consolidating into low-cost geographies is lending new urgency to the issue. For example, prior to its recent strategy to consolidate help desk resources, EDS had established more than 250 separate technical help desks or call centers worldwide. EDS has spent $100 million on a global help desk infrastructure, including its major new global call center facility in Mumbai, India (which went live in July 2003), along with consolidation into additional locations in Canada, Auckland, New Zealand, Argentina, Spain, Italy, and Hungary. EDS help desk consolidation strategy was initially pursued for internal clients and is now being extended to EDS customers. The provider does not generally pursue discrete help desk outsourcing opportunities (unless very large), but technical help desk represents a core, customer-facing activity with signicant implications on overall customer satisfaction. EDS experience underscores several challenges and opportunities that are also applicable to customers seeking to establish oshore technical help desk capabilities, either by themselves or in conjunction with external partners.
Organizations implementing oshore help desk must be prepared for an initial drop
in productivity. There are various ways to combat this tendency, including adding additional temporary stang, staging the work by type or geography, and paying signicant attention to knowledge transfer for the help desk tasks involved. With appropriate preparations, oshore help desks can operate at a rate commensurate with the best of previously domestic help desk facilities.
As is true with oshore application development and maintenance, it makes sense
to use oshore resources to provide support onsite initially, later migrating help desk support oshore, rather than attempting to ship the work oshore all in one step.
The use of India as a location oers tremendous advantages but also some challenges.
These include the risk that customers of oshore help desk providers may object to the use of oshore labor or feel frustrated by accents of Indian help desk agents. EDS found that paying signicant attention to accent neutralization helped yield signicant dividends. EDS also paid signicant attention to preparing scripts for its oshore agents, nding that in many cases these scripts will be followed nearly verbatim by process-oriented Indian help desk agents.
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Leveraging dierent geographic locations denitely has its advantages. For example,
EDS was able to meet its service-level targets after both a terrorist explosion in Mumbai and a power outage in Canada by shifting the work to alternative locations. Moreover, EDS prefers to keep its geographic options open by remaining ready to shift work to alternative geographic locations at extremely short notice. Key to the ability to shift workloads eectively is establishing a common help desk and call center platform across dierent geographies.
By virtue of its signicant investments and broad range of experiences, EDS is in an excellent position to provide eective oshore technical help desk support while achieving the benet of lower operating expenditures. Recommendations Indian companies are suitable for help desk support associated with applications already under their control, as well as Level 1 support for IT infrastructure. Despite the issue of accent neutralization, India remains a good source of English-language technical support. However, look elsewhere if substantial multilingual support is required and the enterprise is not prepared to wait for the Indian rm to acquire it. Emphasize accent neutralization training with Indian suppliers. Ask how language skills are assessed during the interview process. For example, does the outsourcer provide ongoing accent neutralization training? Expectations management is critical. Without a signicant expectations-management process in place, outsourcing the technical help desk oshore is doomed to failure. This means clear SLAs are in place, customers are notied about SLA terms, and the enterprise ensures the outsourcer meets the SLAs. This must take place through a communications process led by senior-level executives. Pay careful attention to knowledge transfer and training on company-specic processes before embarking on a technical help desk engagement. Completion of these processes is essential. Examine the suppliers career paths for technical help desk personnel inadequate career paths mean attrition, which can compromise service quality. Oshore technical help desks require substantial transition eorts, to the point where immediate cost savings may be impossible to achieve. Making oshore-outsourced help desks work requires signicant commitment before benets are achieved. Only organizations that have signicant experience with oshore programming should attempt to outsource their technical help desk oshore.
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The most straightforward approach to pricing technical help desk services is by the full-time employee, normally expressed as a per-hour rate. Customers should evaluate gradual transition to an outcome-based pricing approach, such as a per-call or SLA-based relationship, to provide the outsourcing provider with incentive to improve performance. Expect that the performance of an oshore technical help desk will lag behind in-house standards initially in terms of call volumes achieved and calls times. It may take nine months or longer to approach these standards and start to produce cost savings, due to extensive transition requirements. However, there is no structural reason, given sucient training and eective knowledge transfer, that oshore help desk performance cannot approach or even exceed in-house standards. Avoid a big bang implementation where risks are the high. A key element of transition is to stage help desk work to minimize the potential for customer dissatisfaction. One approach is to begin with relatively simple help desk tasks and graduate to more complex requirements. Another is to expend more resources on the technical help desk in earlier phases, so signicant impact on customer satisfaction can be avoided. Work can also be split on the basis of peak versus nonpeak requirements or by customer demographics using on-site resources for demanding customers. Structure a pilot period in which language, cultural, and technology infrastructure kinks can be worked out without signicant impact on customer satisfaction or service levels. Customers of oshore services are typically willing to accommodate growing pains during the start of a relationship while bugs are worked out and processes are rened. Data Warehouse Data warehousing systems have not been developed oshore frequently. This is likely because of the sensitive nature of the customer and marketing data contained in data warehouses as well as the signicant amount of design and architecture work needed to succeed. However, under remorseless cost pressures and the need to get results on time and on budget, this is changing. Oshore data warehousing is happening, though still relatively infrequently. For example, the state of Washingtons department of revenue had Sierra Systems and HP built a tax compliance data warehouse. HP sent the application development oshore to its sta in India. This heralds an emerging trend and companies can expect to see data warehousing projects undertaken in an oshore mode more and more often. This is particularly the case, as in this example, where an onshore system integrator is able to involve oshore sta under the guidance of onshore designers and share the savings with the client. However, challenges still exist given the substantial amount of design and architecture work to succeed in data warehousing.
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The rewards to moving data warehousing execution resources oshore are:
Lower cost for sta. Productive, positive time dierential the project never stops when the day shift is Process improvements and high-quality results based on oshore contractors
demonstrated qualications, such as ISO 9000 certication and SEI CMM. The risks are: able to hand o to what is also the day shift halfway around the globe, which, in turn, has the work ready for the stateside team the next morning.
A hasty pursuit of cost savings that can prove elusive and be oset by increased
management coordination costs (overhead).
Cost savings that can be consumed by data transfer costs this is especially the case
with large volume data warehousing, as T1 (or T3) lines can eat up the cost savings easily.
Loss of collaboration, teamwork, and the slide to compliance or lowest-commondenominator work versus commitment to a win-win client-vendor relationship.
Cost savings that can be under-realized since design work such as data modeling, data
quality proling, ETL application building, and metadata are well-dened processes quite capable of being demonstrated remotely (although admittedly that has not happened frequently).
Security, which remains a chronic concern in dealing remotely with uncertain

geographies. To determine if a project or system is a candidate for oshore development, the structure and ability of the project to be dened and executed remotely is a critical success factor. Data warehousing is not a new kind of system, and respondents to Forrester surveys reported that some 70% of enterprises had a data warehouse in production. This has several implications. First, data warehousing is not a paradigm shift. It is good solid data management. Both building and operating data warehousing systems are well-dened processes and, therefore, result in projects with well-dened limits and tasks. This is the description of the kind of work that lends itself to being sent oshore. Second, it does not guarantee the absence of organizational issues, cultural challenges, or the occasional technical roadblock. But, in general, it does mean the feasibility of a successful oshore
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execution is within reach. Third, let the critical path of the data warehouse methodology be a guide to the way the opportunities and obstacles are transformed in being executed oshore. Experience shows a set of essential functions for a data warehousing design and implementation. These functions must be provided for in any methodology that plans on delivering a data warehouse system. In addition to such obvious functions as analysis of business requirements, these functions include:
Data modeling. Data quality. Extraction, transfer, and load (ETL) process. Metadata (throughout the above).
In the case of project development, coding and testing are most susceptible to being done remotely (oshore). But each of these functions requires a signicant mixture of design and architecture. Data warehousing projects are data-centric and can entail signicant eort in building the data model. Data quality requires comparing existing data against a data quality standard that has been set based on an understanding of what the data means (semantics). This can be processing-intensive as data is inspected, and it is also an activity similar to requirements and system analysis that is, preparation for design, if not design itself, in the narrower sense. ETL software is typically furnished with a design workstation in which an application is generated based on mapping source to target data elements and applying transformations to produce the expected results in the target data warehouse. Metadata is the design information that is captured to a central repository or small set of federated repositories for reuse in maintaining and extending the system in subsequent releases and iterations. Conspicuous by its absence from the above list is any substantial requirement for procedural language coding of software components by programmers. That is where the oshore implementation and execution vendors have been more successful. This will obviously be an inhibitor. In contrast to coding, a data warehouse should be able to be assembled through custom data modeling, database implementation, and the integration of packages. Moreover, due to the substantial amount of data modeling and physical data integration, a data warehousing methodology is not reducible to methods for assembling and integrating packages, although the latter are surely involved. Data warehouses are data-centric, which means extensive work with dening and implementing the data model and connecting the application to it. This will reduce the more obvious and direct patterns
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of shipping work oshore. However, this does not mean that the work cannot be done oshore. It means that some adjustments will be needed. Data modeling, data proling, the use of ETL technology, and the metadata that connects these are well-dened and delimited bodies of work. They are capable of being rigorously scripted in many, though by no means all, basic data warehousing scenarios. It is a matter of time perhaps two to ve years, given a slow economy until oshore vendors are able to demonstrate capabilities in getting results with these practices. As oshore vendors build and demonstrate expertise in data modeling, data proling and analysis, and ETL technologies and the metadata that connect them, more data warehousing projects will move oshore and be successfully implemented using remote resources. OFFSHORE OUTSOURCING MANAGEMENT ISSUES Implementing And Evolving Oshore Governance Oshore is not a simple six-month project that rms can dial up instantly. As we have observed in our research, there is a four-stage migration that companies go through over a period of 24 to 60, or more, months (see Figure 12). Oshore governance evolves through three levels in parallel, changing dramatically as rms migrate through the oshore journey. What starts as an administrative function evolves over three or more years into a program management and development discipline. 1. Bystanders. Despite the rising tide of oshore hype, the reality is that most rms are either doing nothing or just starting their journey to locations like India, Russia, or the Philippines. Today, more than 60% of the Fortune 1,000 falls into this segment. These rms have no oshore relationships. Research shows that the perceptions of those with no overseas experience vary dramatically when compared with the perceptions of companies that do have oshore IT or BPO expertise (see Figure 13). The bystander period tends to run ve years or more. 2. Experimenters. Another 25% to 30% of Fortune 1,000 rms have oshore experience and relationships with oshore vendors, but oshore is not a key element of their overall IT strategy or spending plans. This segment is typied by its use of multiple oshore providers often more than 10 dierent rms as well as its perception of oshore as providers of sta augmentation or low-cost contractors. For experimenters, oshore spend often represents less than 20% of their overall IT third-party services (in most cases less than $2 million) budget. The experimenter phase ranges from one to ve years, according to Forrester research.
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Figure 12 Characteristics Of Oshore Customer Segment
3. Committeds. A small group of rms 5% to 10% of the Fortune 1,000 has scaled its oshore eorts to incorporate sophisticated governance techniques, such as creating an oshore-specic sourcing oce and focusing its spending with only two to three key providers. These rms employ the oshore suppliers for more complex application maintenance and mission-critical development services. Companies tend to stay in this category for one to three years. 4. Full exploiters. At the top of the oshore pyramid sit those companies less than 5% of the Fortune 1,000 that take complete advantage of oshore through the combination of development of global sourcing as a core skill and investment in the IT process maturity to take a high percentage of work oshore. They have retrained their stas to use a consistent methodology and CMM-based processes to drive their higher utilization of oshore suppliers. For example, one company in this camp has 95% or more of its legacy maintenance being done in India. The full exploiter stage ranges up to ve years in length.
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Figure 13 Issues Holding Back Oshore Investment Vary By Experience Level

Figure 14 The Evolution Of Global Sourcing Governance
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Governance Evolution Parallels The Oshore Journey Directly tied to the four stages of the oshore journey is a parallel evolution of the oshore governance and the global sourcing function (see Figure 14). The role and responsibilities of the oshore governance/sourcing function change dramatically over time it is not a short-term or stop-gap position. There are three primary stages that companies go through as they bolster their reliance and utilization of oshore resources (see Figure 15).
Phase one: Establishment. The strategic focus in this period is on developing and
articulating the overall oshore strategy. With a clear plan in place, the CIO can articulate which IT jobs will be phased out, preserved, or partially impacted and the plan for retraining redundant sta. This is the time to clarify HR issues (such as creating an oshore communication plan) and garner business and IT support for pilots. The establishment phase runs about 23 to 36 months.
Figure 15 Steps In The Evolution Of Global Governance
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Phase two: Encouragement. In this stage, governance evolves to drive use. Internal
resistance to taking mission-critical development and maintenance oshore has to be overcome through joint workshops with vendors on successful projects and cultural training. The program oce will also work with human resources to develop and implement oshore usage metrics for senior IT managers. During this period, monthly vendor performance scorecards should be developed, along with more specic SLAs. The encouragement phase runs about 12 to 24 months. processes and methodologies. This is the time to leverage new oshore services such as packaged application management and remote administration. This process discipline is what enables early adopters like GE and Citibank to send such a high percentage of work oshore. The scope of vendor management also shifts from providing the supplier with a to-do list to pushing the vendor to deploy precious domain expertise and proactively oer up shared risk/reward-based projects. The advancement phase typically lasts less than one year.
Phase three: Advancement. In the nal IT phase, attention shifts to upgrading IT
Governance of the oshore relationship requires the consistent oversight by the steering committee or CIO, the oshore program oce, and the project management team (see Figure 16). These parties must work in concert with their counterparts on the vendors side (see Figure 17). Meeting frequencies between the two sides range from once or twice per year for the steering committee to every two weeks for the oshore program oce to weekly for the project management team.
Figure 16 Governance Provides Adult Supervision

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Figure 17 Governance Requires Consistent Oversight

Suppliers Must Tailor Approaches To Dierent Segments The growing diversity of the customer or prospect base means that it cannot be treated as a single constituency. A new level of investment and higher level of sophistication is required, especially in the area of marketing and services segmentation, from oshore players like Infosys Technologies, Cognizant Technology Solutions, and Satyam Computer Services. Clients and prospects in each of the four stages have dierent challenges with dierent support requirements (see Figure 18).
Bystanders need to feel comfortable with security risks. As neophytes, their lack
of activity is driven by management concerns and a perception that the savings in oshore are overstated. They need to hear about vendors base-level security investments and processes, as well as disaster-recovery plans. Bystanders also need simple spreadsheets that lay out the costs and savings based on referenceable case studies to allay their skepticism.
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Figure 18 Key Vendor Approaches For Dierent Oshore Segments

Experimenters require assistance to put program management in place. The biggest
challenge for experimenters is their lack of a centralized global program management oce and the resulting hodgepodge of vendors with hit-or-miss project results. As they move to the next stage and winnow down their suppliers, experimenters represent the primary sales battleground for suppliers. Vendors need to bolster their soft project management skills so they can help clients develop their program management oce. Suppliers with consistent on-time and on-budget delivery track records can leverage the resulting credibility to share best practices from committeds or full exploiters on consolidating and managing multiple vendors.
Committeds are open to new services and locations. These clients are looking for
help with driving additional usage across the organization and pushing a higher percentage of the work oshore. This means that vendors need to deliver workshops
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on best practices and consult on how to bolster the clients CMM capabilities. Small multiclient events for sharing best practices on driving oshore usage and developing and implementing utilization metrics will help accounts move to the next level. These clients are also open to hearing about more advanced packaged app implementation and BPO services.
Full exploiters want to hear about innovative pricing/relationship models. The most
sophisticated accounts are looking to evolve their relationships into full partnerships. This is where vendors need to deploy their bolstered domain expertise and train account teams to have business-level discussions with non-IT executives. These investments in business acumen will allow vendors to proactively suggest innovative risk/reward pricing models. The complexity of full exploiters projects dictates this level of pricing and delivery creativity.
The Case For Centralized Management Of Oshore Relationships Few companies today have a central organization dedicated to managing oshore vendor relationships. While many companies have multiple oshore relationships with multiple vendors within dierent business units or groups, individual project owners often have no visibility on oshore relationships other than their own and dont have access to existing internal knowledge, experience, standards, processes, best practices, evaluation metrics, SLAs, master services agreements (MSAs), or contracts. This results in increased overhead costs and risk and an inability to leverage vendor relationships. Every time someone wants to send work oshore, he or she has to do such things as research the vendors, develop evaluation criteria, send out an RFP, negotiate with the nalists, visit the nalists, develop service-level metrics, and write contracts. Not only is this process extremely expensive, it assumes that application managers or system managers or their lieutenants have strong vendor management and oshore outsourcing relationship management skills. Unfortunately, most do not have this very specialized skill set. As such, companies need to put in place a centralized PMO or governance structure to manage, monitor, and/or consult on oshore outsourcing relationships. As companies approach to oshore outsourcing matures, global sourcing governance structures, in the form of global sourcing program management oces or add-ons to existing outsourcing program management oces, will become a standard practice. Practical Example: No Centralized Control Of Oshore Relationships A large insurance company recently discovered it had 17 separate oshore outsourcing projects in progress in 17 dierent parts of the business. Individual oshore project owners were at best peripherally aware of what other business units or groups were doing oshore. And the company had no central visibility into these discrete projects. The degree
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to which the company was using oshore vendors only came to light when the CEO requested that the corporate CIO take a look at the oshore outsourcing option as a way to cut costs. Little did the CEO know that his company was already engaged in oshore outsourcing, and the CIO, while he knew that these relationships existed, had no idea just how large or extensive his oshore vendor relationships were. In looking at the individual oshore relationships, it quickly became clear that some were more successful than others in terms of quality delivered and money saved. These inconsistent results were due to lack of process and governance. One group was paying almost 50% more for similar services from the same vendor than another group simply because one group had a manager with strong negotiation skills and experience with outsourcing contracts while the other had an application development manager negotiating the deal. Approaches To Oshore Outsourcing Governance: Bottom-Up And Top-Down There are two general approaches that companies take to oshore outsourcing governance. The rst is a bottom-up, grassroots approach that was born out of necessity and convenience. It is the approach that most companies today use. Typically, a person or group that has done oshore outsourcing becomes known as being an oshore expert. This person or group of people evolves into the informal knowledge base for oshore outsourcing. Over time, this body becomes more formal and provides a real knowledge base containing best practices, lessons learned, standard SLAs, advice about good and bad vendors, etc. This group is more like a library than a project management oce, however, and it has no power. It does not manage oshore vendor relationships, and it does not mandate the use of standards processes or contracting vehicles. In some companies, this group is recognized as the oshore outsourcing authority, and FTEs may even be dedicated to this oce. But, usually, the people participating in this group have other responsibilities as well. In the top-down model, a resource or a team of resources, preferably with outsourcing and vendor management expertise, is appointed by senior executives and is responsible for facilitating and owning the oshore outsourcing process. In the best cases, it is this groups responsibility to:
Research oshore outsourcing. Master oshore outsourcing processes. Establish standards and processes (e.g., every oshore project must have a dedicated
internal project manager, business critical systems can/cant be supported oshore).
Evaluate vendors.
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Visit vendors. Select several vendors to be approved suppliers. Develop criteria for what types of projects should or can go oshore. Develop standard SLAs and contracts. Set pricing with the vendors. Develop metrics for evaluating the success of oshore relationships.
Once the processes are formalized, this group becomes the global/oshore outsourcing program management and resource oce. Anyone or any group looking to do oshore outsourcing must work through this global sourcing PMO. The PMO doesnt actually manage the individual projects once they are up and running, but it intercedes and mediates when necessary. The top-down approach to global sourcing governance is the stronger one because it reduces risk and cost and improves eciency more than the library approach does. However, a top-down approach is obviously impossible without senior executive sponsorship. The bottom-up approach is also valuable in that it too reduces risk and cost, although not consistently or to the degree that a top-down PMO can. The better the organizations internal oshore expertise and management capability, the more successful the companys global sourcing initiatives will be. Creating An Oshore Communication Plan The employee angst and hostility associated with the announcement or discovery of an internal oshore outsourcing initiative can be detrimental to employee productivity and quality. Disgruntled, displaced, or even unhappy retained employees can actually derail or sabotage a companys outsourcing eorts. Because of these risks, companies sometimes attempt to keep their oshore outsourcing plans a secret. Unfortunately, covering up the intention to outsource will likely produce more damage than the decision itself, and a wellthought-out communication strategy controversial as that might be is essential. There is no easy answer to maintaining high morale and employee satisfaction amidst an oshore initiative, but secrecy and defensiveness are a certain prescription for failure. Companies embarking on an oshore outsourcing initiative must make developing and executing a communication strategy a top priority.
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However, communicating oshore strategy exposes a company to signicant implications for current sta, including wholesale defections of key performers that the company would prefer to retain. Avoiding undesirable outcomes will require signicant upfront work because companies must rst assess their internal skill and application portfolios and also develop a sourcing strategy upon which to base their communications and HR strategies. There are four essential steps of outsourcing strategy that have a direct bearing on the communications strategy: 1) performing an applications portfolio analysis; 2) understanding what skills are important for an outsourcing eort; 3) creating the skills inventory; and 4) planning for change. With Oshore Outsourcing, Is Honesty The Best Policy? Sensitivity to oshore outsourcing has grown to the point where attendees at oshore conferences are sometimes going anonymously, attempting to cover their tracks in a hope that they wont be discovered. Prohibition against attendance by press and an unwillingness to be quoted have become standard operating procedure. It is easy to see why companies are reluctant to broadcast their intentions to employ oshore labor, given the growing frequency of negative press, and even public demonstrations against oshore outsourcing. Paradoxically, however, many companies that have been successful at oshore outsourcing cite open communication as an absolute key to success. Yet, although open communication is desirable and necessary, many companies remain quiet about plans for oshore outsourcing due to the likely loss of jobs. Regardless of the potential for backlash, organizations are unlikely to abandon the economic and quality advantages they gain from oshore outsourcing. In any case, it is unlikely that oshore initiatives can remain a secret for long. The question becomes how to proceed. Those companies that are able to clearly articulate why they are pursuing oshore outsourcing will best withstand any potential damage to their brands, while those that do not communicate eectively bear the greatest risk. A negative outcome is often more severe if it has initially been pursued under a cloak of secrecy. Some oshore programs do not target extensive layos but seek to replace contract programmers, free up internal sta for activities with higher business value-add, or simply aim to expand through ongoing job attrition (admittedly, a minority). In the absence of an eective communication strategy, the worst will be anticipated, complicating any hope of a smooth transition. Rather than awaiting the discovery of oshore outsourcing plans and the potentially negative reaction, enterprises must instead plan proactively for retention of necessary talent and address other pertinent issues. While open communications is a laudable goal, more than mere candor is required. An oshore communications plan must have meaningful links to the oshore strategy itself,
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including a clear understanding of applications (or functions) to outsource, employees necessary to retain, as well as HR strategies for the employees that will not be retained. There are four essential steps in oshore strategy that have a direct bearing on the communications strategy. Step One: The Application Portfolio Analysis Prior to communicating the oshore strategy, it is essential to determine which skills must be retained. To determine which skills to retain, companies rst need to do an application portfolio analysis (companies that are outsourcing infrastructure and operations in addition to applications will need to do an IT portfolio analysis also). This analysis will provide a road map for what applications or systems will be outsourced and in what sequence. Few companies are able to concretely predict this before they have some oshore outsourcing experience under their belt. In other words, original intentions often change as companies develop some outsourcing maturity. But companies have to start somewhere. In most cases, companies already have an idea about which applications or systems they would like to outsource they are often problem applications that are either too expensive to maintain or dicult to sta with relevant skills. An alternative approach is to identify specic phases of the software development life cycle to outsource for example, testing or quality assurance. In either case, it is imperative for companies to make a formal determination because this analysis will ultimately be the base of the oshore outsourcing strategy. For example, some companies say that they plan to outsource only COBOL legacy systems. If that is the case, the HR plan needs to target COBOL programmers. Step Two: Understanding What Skills Are Important For An Outsourcing Eort Companies pursuing oshore outsourcing often underestimate the level of competence they need to manage the oshore engagement eectively. Companies need to have certain internal skills to make an outsourcing engagement successful and safe. Of course, outsourcing vendor management skills are critical. Companies need at least one full-time personnel resource (outside of procurement and part of the IT organization) who knows how to manage vendor relationships, milestones, and programs. Most companies that dont have extensive outsourcing experience do not have a resource with the necessary skills. Relevant skills include contract negotiation/management and program management. In some cases, these skills will need to be acquired from the outside or internal training will likely be required. Also critical are business analysis skills. The business analyst (sometimes a programmer analyst) helps to make the connection between the business users and the IT organization. They map the internal customers needs to available technology solutions. They also set
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expectations with end users, manage their requests, and teach them how to communicate their requirements eectively. They also play a key role in providing the necessary knowledge capital and domain expertise to the outsourcing supplier. They are, in eect, the bridge between the business and IT. Companies that have weak alignment and poor communication between IT and the business usually do not have a strong business analysis group or process. Some companies do choose to outsource this role, but this is a risky approach, since the company may lose critical corporate knowledge. Changing outsourcers or bringing systems support back in-house is much more dicult if the domain knowledge has been outsourced as well. Companies that outsource business analysis give up too much control and risk having cultural and communication problems with their end users, particularly when working with an oshore vendor. Eective business analysis skills can mean the dierence between success and failure or saving money/losing money. To avoid losing control and to make the outsourcing relationship successful, the following skills are also important to maintain:
Architects. Project managers. Quality assurance (QA)/testers unless this will be outsourced. IT strategists. Vendor and contract managers.
Step Three: Creating The Skills Inventory Companies must work with their HR department and their IT executives to perform a skills inventory and analysis to determine the following:
What skills are on hand? Which skills are needed? This analysis will take into account the results of the
application portfolio analysis as well as the skill requirements for outsourcing.
Which skills wont be necessary to retain to support systems that will remain in-house
or to support the outsourcing eort?
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Which personnel resources are critical? Which personnel resources will be critical to retain only through the transition? These
personnel resources will be the ones deemed critical to the knowledge transfer phase.
Which personnel resources are about to retire? Which personnel resources are most expensive? Which personnel resources are top performers? Personnel resources in this category
are often worth keeping, even if their technology skills are no longer needed. Not only should the IT organization attempt to retrain and look for a position for them, the organization at large should review their HR needs and attempt to transition this sta to dierent departments wherever possible. As an example, many business units have their own IT organizations or support sta. Check with them to see if they can use these personnel resources.
Which staers are already on a performance improvement plan? Regardless of
whether the skills are required or not, poorly performing sta should be candidates for displacement, and if necessary, displaced top performers can be moved into their positions. Of course, HR must be intimately involved in these decisions because there are often legal issues to consider. The outsourcing initiative is a great opportunity to eliminate redundancies and strengthen the core internal sta. Many companies overlook this opportunity and nd themselves with a core internal IT sta comprised of weak performers who happen to have important or critical skills. This weakness makes the outsourcing initiative even more dicult to execute and maintain.
Will management requirements change? Will fewer managers be required due to

sta reductions?
Which personnel resources are appropriate for retraining for other jobs within the
IT organization or the company at large? Even resources that fall out of the top performer category, but who are still valuable employees, should be considered for other positions in the IT organization or within the company at large. Some IT professionals will be happy to move out the IT organization and into non-IT positions.
Step Four: Planning For Change Based on corporate goals and the information gleaned during the various assessment phases, the oshore outsourcing strategy can be created. This will identify systems targeted for outsourcing, as well as target percentages for onshore versus oshore work, as well as the HR plan. This information will form the basis of the communications plan.
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Companies must also build in a mechanism for evolution of the outsourcing strategy. The oshore communications plan is not static but must evolve along with the companys oshore outsourcing strategy. What if the organization intends to outsource more next year or in 2007? There are many companies today whose initial intent is merely to replace expensive contract programmers with oshore resources, or to free up internal sta for more strategic work using oshore resources. However, as their outsourcing maturity grows and economic pressures intensify, many of these rms then begin to consider replacing internal sta with oshore resources. When the decision is made to alter the oshore outsourcing strategy to include the replacement of internal resources, IT executives need to readjust and carefully communicate the new plan using the steps outlined here. Crafting The Communications Plan After completing these four phases, the communications strategy can be created. Although a clear and consistent message is essential, submessages must be tailored to individual groups. Tactics will vary: Some groups of people should be addressed together, and some need to be approached individually. The oshore communications plan must address the following constituencies:
Personnel resources that will be retained. Approach this constituency rst, and
explain the outsourcing strategy to them. Assure them that their jobs are safe, and their help is required to make the outsourcing eort a success. Oer this sta incentives, such as training programs, salary increases, and/or retention bonuses. Training is a very valuable incentive, because it demonstrates the companys level of commitment to the employee. Retention bonus or salary enhancements may also be needed based on how marketable the resources skills are today.
To get the most cooperation from the retained sta, make sure to include them in the project plans. Keep them apprised of decisions and strategies, and if possible and practical, get them involved in the committee to plan and oversee the transition to the outsourced sta. Also, compensate this sta based on their cooperation with the outsourcing eort. Grade them on this eort, and make sure it counts toward their bonus.
Personnel who will be displaced but whose support is critical to a safe and eective
transition. Companies need to communicate their position to this sta. First, they will need to provide retention or transition bonuses to those who require them. This bonus can be made variable based on how cooperative the employee is during the transition. The more quickly and eciently this transition goes, the better the bonus should be. Also, oer this sta placement support. HR sta should explore other
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options internally for this sta in the IT organization, in departmental IT groups, or any other non-IT group. The HR department should be looking at open positions on a companywide basis to place redundant sta in new positions. Sometimes sta reductions are pursued with such haste that open positions elsewhere in the organization are ignored, lending unnecessary stress to an already stressful situation. Finally, this sta should be oered training, either to take over another role in the company or to make themselves more marketable in the outside world. Companies should also oer this sta time o for training before their jobs ocially end. For example, one client oered soon-to-be displaced sta two hours per day to attend training courses and meet with outplacement counselors. One programmer used the time (and training allowance) to attend cooking classes he was prepared to become a commercial chef when his job ended.
The enterprise as a whole. Companies need to communicate their oshore
outsourcing strategy to the company as a whole because employees may be asked about it by reporters, customers, business partners, and investors. All employees should be relaying the same message and have the same understanding about the oshore outsourcing strategy.
Also, this communication is important because many non-IT jobs (call center, research, tax preparation, legal services, secretarial) can potentially be procured from lowwage oshore nations. To avoid disruption, confusion, and decreased productivity, companies need to communicate their oshore outsourcing strategy to the company as a whole and be very specic about which employees will be aected. All aected employees should be addressed before the companywide communication is made.
External constituencies. Customers, suppliers, business partners, and investors can
also be aected by a companys decision to outsource. New supply chain processes may need to be established to accommodate the outsourcer. Customers may be angered about US jobs going overseas and elect to shop elsewhere. Investors may worry about the companys viability when customers nd out about the oshore outsourcing initiative. Consequently, the company will need to craft an eective message for the external world. The executive team and the PR team need to create this together. The IT organization alone should not be responsible for this very important and sensitive communication (see the Figure 19).
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Figure 19 Constituencies To Consider In Oshore Outsourcing Communications
Recommendations Prior to embarking on the communications strategy, organizations must perform a skills inventory analysis and an IT portfolio analysis so that aected and non-aected employees are identied. Make sure to include an analysis of open positions elsewhere in the enterprise to minimize job displacement. These analyses should also guide the communications strategy. A communications strategy for oshore outsourcing is crucial, but it cannot be completed in a vacuum. In order to have maximum impact, the communications strategy must be accompanied by appropriate HR programs that not only identify aected and non-aected employees, but include retention bonuses and other relevant measures, including training and outplacement assistance. Identify key employees upfront and approach them with retention programs already in hand. These programs must be sucient to make sure these employees are active supporters of the oshore program and do not immediately depart, or worse yet, act to undermine the initiative. These programs should include bonus structures and other elements of the retention program. Moreover, an eective communications strategy must be tailored for a variety of constituencies that includes not only the aected and non-aected employees, but also
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other corporate departments. With sensitivity about oshore outsourcing growing, outside consistencies must also be included in the communications equation. If it is feasible to transfer employees to more value-adding tasks, identify these activities upfront, along with any necessary training in project management, vendor management, and technical disciplines. A well-conceived retention program is another essential element to success. The oshore outsourcing communications strategy must be rooted at the very highest levels of the organization, preferably the CEO, to hold sucient credibility and maintain consistency of the message. In some organizations, the CEO has personally communicated the oshore initiative, thereby minimizing the potential for resistance. Make sure a compelling business case is part of this message. Include public relations competencies in the oshore program management oce, and designate a senior corporate ocer as the rms ocial oshore spokesperson to respond to queries. The oshore communication plan must also be tailored in phases. For example, the same message given when initially exploring oshore outsourcing will not be appropriate during the ramp-up of an oshore initiative. Do not intentionally mislead the employees initially aected or those that might be subject to future outsourcing-related reductions in sta. Such dishonesty is sure to be remembered, compromising future oshore initiatives and the overall corporate culture. An eective oshore communications plan should use all available and relevant media to communicate the initiative, including messages from senior management, in-person small group and town hall meetings, along with intranet sites, email, and Webcasts. Do not skimp on the extent of communication required. For example, one organization conducted 65 separate town hall meetings during a period of 12 weeks. The specic choice of media should parallel the gravity of the message. In particular, do not rely exclusively on email for initial messages; instead, use it to reiterate what has already been disclosed in other media. Most companies are hesitant to communicate their oshore programs externally. In fact, external communications are also extremely important, because oshore outsourcing may entail changes to supply chain processes, and employees are likely to be asked about it by press and others. GETTING YOUR INTERNAL HOUSE IN ORDER IT Readiness Assessment Elements of IT readiness include the delivery of large projects on time and within budget, standardized development and maintenance processes, mature requirements denition and
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change control processes, and cultural factors (see Figure 20 and see Figure 21). Answering the following questions will give a good indication of whether your organization is ready to make the leap to oshore outsourcing. Business Cultural Readiness Measures Willingness To Embrace The Change An enterprises business culture can have signicant implications on the ability to achieve success in oshore. For example, business enterprises that lack substantive experience with outsourcing as a corporate practice, or lack experience working with partners in developing geographies, are at a disadvantage when it comes to fostering supportive corporate culture. Elements of business cultural readiness include: tolerance for risk and change, adherence to Six Sigma or other quality processes within the organization, and an existing pattern of outsourcing. Based on our experience with clients that perform these assessments, most organizations fall into three general groupings (see Figure 22). Where rms place across the three groups will dictate their oshore timing, engagement method, choice of supplier, scope of services, expected savings, and level of internal investments:
Ready IT processes, primed culture. Companies in this camp have more sophisticated
IT processes in place to manage the work and the oshore provider as well as a history of outsourcing and risk taking. This means they can ramp up in a 12- to 23-month period.
Inconsistent IT processes, cautious culture. This class of rm has to be more cautious

in the area of vendor selection and the types of work that they send oshore. The move to taking large-scale, mission-critical work to places like India will take longer as rms have to bolster their processes, especially around creating specications and project management.
Immature IT processes, resistive culture. To fully realize the benets of oshore
is going to require a prolonged migration and investment from companies in this segment. They will be better served by choosing a US player like Sapient or Keane that has an oshore arm to compensate for their underdeveloped IT processes and lack of outsourcing heritage.
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Figure 20 Assessing Oshore Readiness: IT Process Readiness
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Figure 21 Assessing Oshore Readiness: Company Cultural Readiness

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Figure 22 Typical Oshore Readiness Groupings
Our experience to date indicates that poor IT readiness is more of an obstacle than poor cultural business readiness. Of course, an IT organizations process will normally mature by virtue of exposure to oshore outsourcers, particularly Indian suppliers. Based on your scoring, we suggest the following guidelines for strategies, tactics, and expectations (see Figure 23). An organizations readiness to begin oshore outsourcing is based on a combination of the rms IT process and cultural readiness. The scoring in this readiness assessment will dictate the speed of oshore ramp, vendor choice, service evolution, and level of savings.
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Figure 23 Suggested Strategies, Tactics, And Expectations For Oshore Readiness

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CHOOSING THE RIGHT OFFSHORE DESTINATION AND VENDOR India is no longer the only game in town. Global outsourcing alternatives are in fact proliferating. The leading outsourcing suppliers are pursuing geographic transparency. Oshore suppliers are expanding globally. Availability of IT resources and expertise does not correlate with desirable cost or a low-risk business climate. Beyond dierences in billing rates, dierent geographies oer varying capabilities. Whether oshore or nearshore is the best alternative depends on your situation and perspective. Oshore Versus Nearshore Compared to nearshore, oshore outsourcing presents a more attractive cost picture. Oshore providers tend to have higher process maturity. Time zone dierences promise the potential of 24x7 development. India features the largest, most stable selection of IT outsourcers in the world. Regions like India and China oer the largest resource pools in the world. Oshore arrangements tend to be higher risk than nearshore, unless managed eectively with the right mix of project management and communications skills. By contrast, nearshore eases the communications hurdle a bit. Time zone dierences are not as great, minimizing the need for phone calls at odd hours. The transfer of personnel is more reliable than oshore, especially with NAFTA countries Mexico and Canada. The regulatory burden is less. Nearshore regions are more stable politically than India and China. The potential for cultural misunderstandings is reduced. When evaluating potential locations, consider the following criteria:
General conditions. Governmental support. General infrastructure. Communications infrastructure. Available IT resources. Educational system. English language competency (North American clients). Cultural compatibility.
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Compensation/labor rates. Quality initiatives.

Following is a brief rundown of the top oshore and onshore outsourcing regions (see Figure 24):
India. India comes out on top on nearly all of the above criteria. Currently, the
geopolitical risk is low, although conict with Pakistan could re-emerge. Governmental support has been unstinting. The general infrastructure and communications infrastructure have both matured and improved. Thanks in part to a strong educational system, available IT resources remain high despite enormous growth in the Indian IT industry. Labor rates remain attractive, despite competition, and Indian rms are the most advanced in the outsourcing world in quality initiatives. The Achilles heel of Indian outsourcing remains the potential for cultural conict and misunderstandings.
The Philippines. The Philippines is a mecca for call centers. Conditions are generally
stable with some risk of terrorism. Infrastructure and governmental support are strong. Availability of IT resources is high and growing. The English language is ubiquitous, and cultural synergies are apparent in this former US protectorate. Compensation rates are low, with corresponding cost savings high.
Figure 24 Summarizing The Geographies

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China. China is an emerging outsourcing colossus. In the midst of impressive
economic growth, the risk of terrorism is moderate to high. Areas of risk include weak infrastructure outside cities like Shanghai and Beijing, weak-but-improving English language skills, and high potential for cultural conict. The potential for cost savings here is high.
Canada. As a nearshore alternative, Canada is a haven with its highly stable conditions,
excellent infrastructure, and largely supportive government. IT resources are widely available, the educational system is good, and of course, English is ubiquitous. It is hard to imagine much cultural conict cropping up. On the other hand, the potential for cost savings is limited, as it is second only to Ireland in costs.
Mexico. Mexico is coming on strong, with low risk of political instability and a
supportive government. The general and telecomm infrastructures are mixed but improving. The quality of IT resources is high. The potential for cultural conict exists, however, and English language skills can be limited. Labor rates are generally attractive, roughly 10% more than India with lower overhead.
Ireland. Though highly stable and welcoming to business, Ireland is considered the
most expensive oshore alternative, which reduces the potential for cost savings. The educational system and infrastructure are generally excellent, with ubiquitous English spoken. The availability of IT resources is constrained by signicant market penetration.
Russia and Ukraine. Prospects for outsourcing in countries in the former Soviet
Union, such as Russia and Ukraine, are mixed. Governmental support is erratic, infrastructure is poor but improving, and the use of English is limited and inconsistent. But availability of IT resources is high, and the educational system turns out more scientists and engineers than comparable populations. Potential for cost savings here is high, as is the potential for cultural conict.
Oshore Vendor Evaluation Process The vendor evaluation process for oshore providers is much the same as any other vendor selection process. The process starts with a basic investigation (Internet research, recommendations from colleagues, perusing the media) into the eld of possibilities. As with any other project, companies then invite vendors to visit. The company will visit shortlisted vendors at their location for a day or more, meeting with the head of quality and delivery. The three overall criteria to use when evaluating candidates are: 1) technical skills; 2) process and tools; and 3) general compatibility. However, there are additional vendor selection criteria.
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Technical strengths and capabilities. Global capabilities. Engagement management and relationship management skills. Project management skills. Soft skills training. Contingency planning procedures. Quality assessment/audit/processes. Financial performance. Knowledge management and transfer processes. Security processes. Flexibility and cultural t. Process automation and integration.
Clients should also evaluate the degree to which the oshore supplier has achieved a global delivery model. GDM requires processes, tools, methodologies, infrastructure, and dispersed locations. The payo is the timely delivery of superior quality IT solutions at the lowest possible cost. The oshore market evolution begins with the migration of leadingedge users oshore. As a result, they cut their local contractors, which drop their rates in turn to remain competitive. The large vendors build out their oshore presence to counter both trends. More conservative users follow with safe-bet large US players. The oshore players then build out new services that further challenge the incumbents (see Figure 25). Oshore vendors are segmented into a number of categories according to business focus and process/tool sophistication (see Figure 26).
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Figure 25 Evolution Of Global Delivery Model
Further Vendor Selection Criteria Engagement Management Skills/Relationship Management Skills The oshore relationship is not an easy one to manage. It requires constant attention to ensure consistent results. This means that the vendors companies engage must have formal and strong relationship management processes and resources. Without this component, projects can be derailed, deliverables may not meet expectations, and service levels may not be consistent with what end users require. During vendor selection, companies must evaluate a vendors relationship management maturity. Several of the top-tier vendors do very well in this arena. Many have hired former client partners from the former Big Five consulting rms, such as Accenture and PwC, or even the management consulting rms, such as McKinsey or Bain, to support this level of relationship. But some vendors dont yet understand the importance of this skill set and have not been able to perfect the provisioning of it. Also, in India, especially below the top eight or 10 vendors (by revenue only), many of the rms are weak in this area, although they have brilliant technical skills. This means that the client has to provide more of the relationship and engagement management resources. Not only can this be challenging, since it requires a unique and higher level skill set, but it also represents additional overhead that companies may not have anticipated. For clients that dont realize they have to provide this skill, the relationship contains much more risk. As anyone who has tried to evaluate and dierentiate the top-tier Indian vendors knows, they all look alike initially. They all have great technical skills; the highest quality assessments; and beautiful, safe campuses. In doing more in-depth research, however, dierences rapidly emerge. The area of relationship, engagement, and account management is one area where there is clear dierentiation between vendors.
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Figure 26 Oshore Vendor Segmentation
Project Management Skills Given the complexity of working through time zones, cultures, and multiple remote communications technologies, strong project management will be required to keep the project on track. Indian vendors project management skills are not as mature or as abundant as their programming skills. Project management is simply not something the vendors invested in until recently. So, in selecting a vendor, evaluate project management skills. Meet with the project managers to evaluate their project management competence. Some tier one vendors have Project Management Institute (PMI)-certied project managers available and are continuing to invest in this certication. Some US-based Indian vendors, such as Syntel, Covansys, and Keane, are actually certied Project Management Institute training providers. Infosys, an India-based Indian vendor, has a whole leadership institute and campus dedicated to training resources in project management and leadership skills. This initiative is so important within Infosys that the director of the leadership institute reports directly to the CEO. Smaller vendors typically have not invested in strengthening these skill sets. For smaller projects, companies can survive with weak project management support, but as the projects scale and become more complex, as is the trend, project management support is critical.
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Technical Skills Competency Most Indian vendors either have skills in multiple areas, or they can quickly acquire or train sta most Indian vendors have state-of-the-art training processes and tools since they have to acquire customers and maintain margins. But this does not mean that the vendor has depth or breadth in those particular skill sets. In some cases, when the technology is old, proprietary, or highly customized, client companies cannot expect depth or breadth and, in fact, often have to train the vendors. But, in other cases, with skills such as SAP, Siebel, or Oracle, there are plenty of vendors with breadth and depth, so make sure you engage with one of them. To ascertain the technical competency of the individual vendor, you must interface with the technologists and speak to references that have used those skill sets. Vertical Breadth/Depth Like their US-based tier one competition, the top-tier Indian vendors are beginning to go to market by vertical. Many of them have developed very strong vertical or industry skills after years of working with clients in certain industries. For clients, this experience is invaluable for projects that require more than just coding or maintenance. The vertical depth and breadth tend to lie in banking and nancial services (this vertical is the largest consumer of oshore IT services), insurance, utilities, retail, telecom, and manufacturing industries. Of concern to potential customers should be the depth of vertical expertise. Evaluate the depth by examining revenues from vertical segments, talking to vertical customer references, and evaluating biographies of the vertical industry practice heads and consultants. Ability To Help Clients Support Their Oshore Eort Internally Several of the top-tier oshore vendors actually help their clients in their eorts to increase awareness and get buy-in and acceptance for oshore outsourcing. Not surprisingly, these are usually the vendors that have strong relationship management capability. Most companies beginning an oshore relationship have internal informational seminars about the benets of oshore outsourcing, both to make a transition to an oshore outsourcing model smooth and to encourage individual business units or application groups to consider using oshore providers. Some vendors will actually provide several-hour informative seminars complete with other customers and outside experts as well as vendor representatives. Credibility, History, And Client Base Of Vendor How long has the vendor been in business? What types of awards has it won? With whom does it have partnerships? Who is its client base? Given the number of Global 1,000
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companies using Indian vendors, most top-tier vendors are able to produce a high-quality client list, as well as a high-quality partner list (many of them act as subcontractors for the top-tier US-based outsourcing and consulting vendors, such as Accenture and IBM). Also, the amount of time that the vendor has been doing oshore outsourcing correlates to its ability to eectively manage and support oshore relationships the longer the better. Track Record And References Companies must investigate their prospective vendors track record and talk with multiple references. Companies must be prepared with meaningful questions related to the references positive and negative experiences with the vendor. Companies should also endeavor to nd other clients of the service provider rather than just the vendor-supplied references because the vendor-supplied references are likely to be the most satised clients. News articles, research sources such as Forrester press releases, and the vendors Web site are all sources of information. Vendors that do not have a track record and that cannot produce multiple reputable references should be removed from the evaluation process. Percentage Of Sta Working Oshore Versus Sta Onshore Or At Client Site Although most vendors oer a combination of on-site and oshore support, most are skewed in one of the two directions: 1) on-site sta augmentation and/or project work using resources from remote geographies, or 2) oshore delivered maintenance, sta augmentation, or project work. It is important for clients to understand which model they want or need and then map those needs to vendor capability.
On-site-centric oshore vendors. These vendors come from a sta augmentation
background and still have more resources based in the US or Europe than oshore. Many of these vendors are now moving to an oshore model as companies slash contractor budgets and seek a more cost-eective model for sta augmentation or outsourcing. This type of vendor is ideal for companies that require on-site support and do not want to move resources oshore or even o-site. They are also ideal for helping companies move slowly from an on-site delivery model to an oshore delivery model. For companies that want to have the bulk of their services delivered from an oshore location, this type of vendor isnt ideal because it likely will have a problem scaling to meet increased demand for oshore talent, and it does not have the depth of experience with oshore delivery that the oshore-centric vendors do.
Oshore-centric vendors. These vendors usually have about 70% of their resources in
the oshore location and 30% at client sites or in delivery centers near client locations. Although these vendors may have started in the sta augmentation business years ago, they have since moved to a model where the majority of their services are delivered
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from a remote location, thereby oering a lower blended price to clients and increasing their prot margins. Companies that want to save money and move work oshore should be looking at this category of vendor. Ability To Insulate Clients From Primitive Country Infrastructure Risks Many low-cost remote geographies have primitive if improving infrastructure. Necessities like consistent power generation, working phone service, safe drinking water, and reliable mass transportation systems, or even reliable roads, may be nonexistent. Fortunately, most top-tier vendors have their own power-generation capabilities, bus services to get employees to work, water purication plants, satellites, etc. This is critical for ensuring that your work is done consistently and safely. Soft Skills Training Programs Culture clashes or miscommunications based on cultural dierences can have a devastating impact on any outsourced project. The Indian culture, for example, is very dierent from the American culture. Americans are much more aggressive and communicative than Indian developers, who are much more respectful and passive. Indian developers do not like to ask questions, and they do not like to point out errors in things like clientsupplied specications because this is viewed as rude in India. Rather than insult the client, they would prefer to code to the spec, even if it is wrong. This is why soft skills training programs are essential to making a cross-cultural relationship work. Tier one Indian vendors provide their consultants with assertiveness training, and they teach them about the necessity of the question-and-answer dialogue, which is obviously critical in situations where the client does not provide rm specs or requirements and where requirements are constantly changing. Companies must make sure the vendors they engage provide foreign consultants with cultural training, often called soft skills training. This soft skills training usually takes the form of a boot camp or multiday training session in which the Indian developers learn how to communicate and collaborate with non-Indian cultures. It also teaches them about the personal habits of other cultures and the requirements for living in other cultures: bathing rituals, going out to dinner with colleagues, non-Indian food, clothing styles, etc. Some vendors will also provide similar training for a companys internal resources. They teach the local sta about the Indian cultures and habits so that dierences can be understood and bridged more quickly. Forrester has found the most productive crosscultural project teams are those where members have been culturally cross-trained.
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Telecommunication/Networking Facilities This has to do with the number and size of the communication channels between the client country and the vendor country. Most Indian vendors have a variety of ber and satellite links to provide the greatest number of options and redundancy for clients. This redundancy is critical given the weak infrastructure in many remote, low-cost geographies. Also, the vendor should have a local hub (meaning in the same country as the client) to which the client can connect so that it doesnt have to run lines from Iowa directly to India. The vendor typically pays for the India part of the link, while the client only pays for the link from its location to the local hub. The ability to provide the appropriate type of communications facility should be part of any oshore vendor evaluation criteria. Ability To Provide Contingency Plans In Case Of War Or Catastrophe Thorough contingency plans are critical for all oshore vendor relationships because all oshore locations carry some political or infrastructure-related risk. Most of these contingencies consist of human resource contingencies: If communication is cut o between a company and its remote workers, who will manage or develop systems being maintained or built from that remote location? Some top-tier vendors are able to promise their clients such things as near-site employee pools and guarantees of on-site ready sta so that if there is a communications outage between the oshore location and the client location, the vendor can simply ip a switch and have the client data feed run to a local or safer facility. But this requires the vendor to have facilities in multiple countries and to have visas ready for those employees that must now move to the other geographies, or the vendor must have a signicant labor pool in those other countries. In addition, clients must evaluate the normal business continuity plan (BCP) and disaster recovery (DR) capabilities of these vendors. The top-tier vendors have strong DR and BCP processes that are well-documented. Demand these from the vendors during your evaluation and ensure that all BCP and contingency provisions are specied in your contract. Security Companies must ensure the vendor they select can accommodate their internal security policies. Most top-tier oshore vendors pay more attention to security then domestic outsourcers because they have had to from the beginning in order to win business. Still, companies should have their internal security sta evaluate the vendors security capability during the evaluation process, and they should evaluate the security of the facilities when they visit the vendors oshore locations. One Forrester client visiting Indian vendors recently took a vendor o his shortlist because he noticed that a locked door (in most
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facilities, doors are opened with card key entry systems or by a security guard) had been left ajar to allow people to come and go without having to use their entry badge. At rst the client thought the door was just stuck, but when the door remained open throughout this entire visit, he investigated and discovered that: 1) The door had been purposely wedged open, and 2) the vendor took no action to unwedge the door. Quality Assessment Audit It is a good idea to use a vendor that has at least a SEI CMM Level 4 rating, although again, the top-tier vendors in India all have SEI CMM Level 5 ratings. Keep in mind, however, that not all such ratings are created equal. To determine the value of the vendors quality status, ask the following questions:
Who performed the SEI CMM assessment? The Software Engineering Institute
does not certify any companys process maturity. SEI CMM-trained assessors audit the maturity of a companys processes and rate this maturity Level 1 to Level 5. Third-party vendors typically provide the assessment. For example, KPMG has an audit group that provides this service, and many Indian vendors have been assessed and rated by this KPMG group. However, some Indian vendors have assessors on the payroll and do their own SEI CMM assessments. To ensure the assessors objectivity has not been compromised, clients should demand evidence of third-party SEI CMM assessments.
When was the assessment done? The Software Engineering Institute does not require
companies to be recertied on a regular basis because the SEI CMM assessment is not a certication. So, a company may be assessed at Level 5 in 1999 and never reassessed; however, it is still being honest when it says three years later, in 2002, that it is SEI CMM Level 5-qualied. Vendors should reassess their process maturity on a periodic basis, just as they are required to do with ISO certication.
What percentage of the vendors organization was assessed? Vendors can have a
single project, facility, or small part of their organization assessed and achieve a mature CMM assessment. In marketing material, it can look as though the entire organization uses state-of-the-art processes, but in reality it may only be 5% of the vendor organization that uses mature processes. Ask vendors claiming SEI CMM assessments to demonstrate what was included in the assessment.
Financial Stability And Legal History Today, with the number of rms in the oshore outsourcing market (there are approximately 270 Indian outsourcing vendors with oces in the US today) and the
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relative newness of some of them, prospective clients must investigate the nancial stability of vendors as well as their legal history. When vendors fail, merge, or are acquired, client projects can be signicantly disrupted if not derailed. To avoid this, ensure that service vendor candidates are nancially stable, arent involved in any serious litigation and arent takeover targets. This is easier said than done in many cases because many of the vendors are not public and so are not obliged to disclose accurate nancials. To win business, they may disclose unaudited nancials to prospects, and prospects and their nancial experts will have to make a determination about the validity of these reports. Prospects should also use third-party sources available on the Web and through rms like Forrester to better understand the vendors viability. Hiring Policy (Experienced Versus Inexperienced Hires) There is no doubt that the average age of sta at Indian oshore rms is very low. As these companies scale, they have to hire directly out of college and train. This is not to say that these people arent quality developers, although they are not appropriate for higher level work or project management work. Fortunately, these companies are fairly hierarchical, and one would rarely nd a new recruit doing critical client-facing or high-level project work. The key is to understand what type of schools the vendor hires from and what the degree requirements are for new recruits. Some rms hire people out of technical training programs, while others require college or graduate degrees. Scalability Companies must make sure that a prospective vendor is suciently large (or small) to accommodate their project. If the largest similar project the vendor has dealt with before is signicantly smaller than the one you are considering, you need reassurance that the vendor can step up to this in terms of sta, infrastructure, and process. Conversely, if your project is much smaller than the vendors norm, this is also a risk. Clients that fall into the small sh in a large pond category rarely receive sucient management attention. The Trend To Consolidate Oshore Suppliers It used to be an article of faith that no oshore customer in its right mind would outsource with a single supplier, given the immaturity of the industry and limited experience. In some cases, this led customers to embrace three or more oshore suppliers, typically partitioned by project. However, a variety of factors are combining to reduce the number of vendors engaged by any single company in some cases, customers are considering consolidating to a single provider.
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Maturing oshore governance practices. Customers have become increasingly
sophisticated in vendor management and are using centralized governance mechanisms to identify synergies and eliminate redundancies. As Indian vendors become more familiar, customers feel less need to hedge their bets across multiple suppliers. Multiple vendor scenarios are still dictated by requirement for unique competencies as well as political factors but are becoming less easy to justify over time.
Top-tier vendors oer a broader set of services. Customers that evaluated tier one
suppliers just two or three years ago will nd that their initial evaluations have fallen out of date. Why? The tier one suppliers have broadened out, lling in some of the holes in service breadth that motivated some multiple vendor scenarios. The playing eld has not leveled entirely because tier one suppliers still vary signicantly in terms of their capabilities, but in many cases this has evolved into a question of style more than of substance.
Second-tier suppliers become more focused. Tier two suppliers have recognized
the opportunity to serve customers with smaller oshore ambitions, or just smaller customers generally. Some of these suppliers, such as Patni, represent scaled-down alternatives to the tier one players.
The multinationals expand their oshore capabilities. Leading multinational rms
are continually expanding their oshore capabilities. While they currently lack a wellhoned process for distributed development, they still retain superior relationships at the boardroom level.
The rapid growth of vendors leaves users concerned about responsiveness. As tier
one suppliers increasingly focus on the largest potential engagements, some customers fear that their exibility and responsiveness is deteriorating. One client we spoke to, a multinational rm, is already employing tier two vendors exclusively because it would not get enough attention from TCS, Infosys, or Wipro. In parallel, the clampdown on visas by the US government has clients looking to spread their work around.
Firms are looking to cut their oshore management overhead. Keeping multiple
vendors on their toes does not come without its cost. Starting up new vendor relationships entails the cost of evaluation, infrastructure synchronization, and ongoing oversight. These costs are not insignicant, particularly if a full-time manager at $100,000-plus per year is dedicated to an individual supplier.
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So What Is The Right Number Of Oshore Suppliers? Given these changes in the market and clients ability to manage oshore vendors, some of the old adages about the right number of vendors are no longer as tried and true. Many clients have defaulted into the rut of having two or more top-tier suppliers as a substitute for meaningful governance and contract SLAs, believing that having multiple vendors alone will ensure responsiveness and competitive rates. Instead, there are three factors that clients should consider when dening the size of their oshore vendor portfolio to minimize management overhead and maximize savings and responsiveness.
Level of oshore spending. Unless they need a discrete set of specic skills from
multiple vendors, clients spending less than $2 million to $3 million per year should focus that activity with one vendor. The overhead of setting up and managing multiple vendors and the constant bidding processes can easily give back $200,000 to $300,000 a year in additional costs overhead.
Breadth of skills required. Clients can now winnow their stable of oshore providers
down to two to three players with a mix of onshore, top-tier, and oshore specialists and have depth and breadth.
The level of responsiveness. Clients have multiple approaches for driving suppliers
to address their needs, and not all require the overhead of adding a second or third oshore provider. Firms with an underperforming supplier can leverage the oshore capabilities of an oshore supplier like Accenture to foster competition. The client can re-open its contract and change SLAs around the time to initiate and ramp up a project. This tactic may be less onerous and, ultimately, better address why the vendor is underperforming. Finally, there is the age-old tactic of two or more pure oshore providers to drive responsiveness.
Oshore Program Management: Organization And Evolution A Forrester client recently asked us about the organization and evolution of the oshore program management oce (OPMO). This client is running an oshore program management oce for a rapidly growing oshore program. She is the only FTE in the program management oce. Further, she is getting only minimal input from internal business experts in the security, HR, risk management, legal, and procurement areas. She has little or no leverage with these experts. Originally, the oshore program consisted of 25 application support FTEs oshore from one external vendor. Today, the company is increasing its oshore services consumption and hopes to have 400 FTEs and three vendors oshore by the end of the year. It is also planning to outsource a variety of IT (infrastructure management, database administration, help desk) and business process functions (back-oce processing, call center work). The
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client would like to know how many people should participate in her evolving oshore program management oce and which internal, non-IT business executives should consult with her on a regular basis. The Oshore Program Management Organization An oshore program management oce or governance structure requires a number of internal and, in some cases, external experts. The bulk of the eort is required at the beginning of the program and during program escalation. During the startup phase, the OPMO has to lay the foundation and set standards to support future oshore outsourcing projects. So, it must do such things as negotiate and contract with external vendors, develop guidelines (or mandates) about the level of risk the company is willing to accommodate, develop security policies related to oshore relationships, decide which types of systems can be outsourced, and determine how to measure the value of oshore relationships. Similarly, as the program grows and vendors are added and other functions are sent oshore, more program management eort will be required to safely and eectively expand the program and alter the existing standards and processes to accommodate the larger eort. While representatives are needed more at the start and during program escalation, participation in the oshore program management oce is needed from:
A senior IT executive. This person will provide input about IT budgets, IT strategy,
priorities, and stang plans.
Human resources. HR sta will help the OPMO determine what outsourcing will
mean to internal sta costs and answer questions like: How many contactors does internal IT use and where does it use them? How will severance be handled and what will it cost? Which types of skills does the company want to retain or retrain? How can/ should cultural training and awareness programs be handled?
Business continuity planning/disaster recovery planning. This group will help the
OPMO establish processes for DR and BCP internally and with the vendors.
Compliance. In the nancial services industry, this input is critical to ensure that all
outsourcing transactions are legal.
Legal. The OPMO will need internal legal sta to write and review contracts. The
OPMO and internal legal sta may also need external outsourcing legal experts to support the project.
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Risk management. Risk managers identify risk thresholds and help determine what
can and cannot be sent oshore, what countries are the least risky, and maybe even which vendors are the least risky.
Procurement. Procurement sta can support the contracting process. An internal outsourcing specialist. Many companies have outsourcing program
management oces or a chief sourcing ocer (CSO)/VP of sourcing. If so, experts from this group or the CSO should be involved during OPMO development. Input from an internal sourcing expert is invaluable and will expedite the OPMO setup phase.
Security. Internal security experts must be involved to establish secure processes. The
security people will direct how the company works/communicates with the vendor.
Finance. In many cases, the decision to oshore outsource is nancially motivated. As
such, it will require the expertise of the nance executives to make sure the nancial model and projected savings makes sense. Also, the nancial people are often involved in the contracting process.
Public relations. Today, with the backlash against oshore outsourcing, PR executives
need to craft a message for external customers, shareholders, and business partners. In addition, the PR sta may help create the internal message to employees.
Networking/communications. This resource sets up the connection to the vendor and

is henceforth always on call to monitor and troubleshoot. Once the PMO is established, these resources must continue to support it on a regular, but part-time, basis (an hour per week or per month or when a crisis arises). This sta must be responsive to the PMOs needs. The programs executive sponsor (e.g., CEO, CFO, COO) typically mandates this cooperation to mitigate security, HR, PR, and legal risks. Obviously, the executive sponsor, to get this cooperation, must have power and credibility outside of the IT organization. Full-Time Oshore Program Management Organization Stang While many internal experts are required to support the OPMO on a part-time basis, companies must designate a person or team of people to run the oshore program management oce on a full-time basis. Internal project and relationship managers are good candidates for the oshore PMO. OPMO sta should not be pure IT people and should have the following skills or characteristics:
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Management background. Strong communication skills, both written and oral. Contract negotiation experience. Outsourcing experience. Strong organizational skills. Credibility within the business and IT. Project management skills. Relationship management skills.
How Many Full-Time Employees Does The Program Oce Require? At steady state, the OPMO usually has some or all of the following responsibilities:
Vendor management. Relationship management. Coordinate governance program. Reporting. Denition of guidelines for managing scope change and change requests. Facilitation of communication. Oversight/coordination of network connectivity and environment set up/changes. Coordination of requests for services. Coordination/management/approval of statements of work or work orders. Monitoring and management of metrics: analyzing vendor performance, SLAs,
engineering improvements when necessary.
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Intermediation between individual project teams and vendor. Monitoring, review, and approval of billings and costs. Contract administration. Interfacing with executive steering committee.
The number of FTEs required for the OPMO depends upon the size of the oshore program, the program oces responsibilities, the number of vendors engaged, and the stability/maturity of the program oce. For small oshore eorts (ve to 25 oshore resources, one vendor) in which application owners or individual project managers are managing and interfacing directly with the vendors, one qualied FTE should be able to manage the program as long as he can second other resources on an as-needed basis. A program oce supporting more than 100 FTEs oshore with multiple vendors and types of work being outsourced should be staed using the following guidelines: one director/ manager; one to two reporting people, depending upon reporting requirements and sta seniority; and one vendor/engagement manager for each vendor. As the volume of work ramps up in more specialized skill areas, companies may also have specialists that focus on discrete areas like BPO or ERP outsourcing. Recommendations
Companies must ensure that the OPMO is sponsored by a senior-executive,

C-level sponsor.
An OPMO requires dedicated, full-time sta. It must solicit support from a number
of internal experts, including legal, HR, nance, security, risk management, public relations, and procurement.
Senior business executives must direct required internal executives to cooperate

with the OPMO.
Companies should appoint an oshore program director who has the following
skills: management, strong communications skills (both written and oral), contract negotiation experience, outsourcing experience, strong organizational skills, credibility with the business and IT, project management skills, and relationship management skills.
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Best Practices In Oshore Outsourcing From The Mouths Of Clients Forrester recently attended the user conferences of Cognizant and Syntel, both leading US-based integrators with enthusiastic and growing customer bases. Each conference featured valuable presentations from oshore practitioners. We oer here a sampling of best practices discussed at the two conferences.
Oshore outsourcing and the hero programmer. The prospect of oshore
outsourcing can loom as a signicant threat to the status of the hero programmer, who through experience and lasting contributions still retains enviable status in many IT organizations. It has long been understood that productivity rates dier markedly between top programmers and average programmers. Moreover, top developers typically exceed the productivity of oshore developers, and their creative insights are invaluable. However, they are seldom enthusiastic about documenting and testing two processes for which oshore developers are ideally suited. One customer present at the conferences developed a new wrinkle on the issuance of a performance bonus for cooperation with oshore developers. In this case, bonuses were withheld from even the top developers until the company was comfortable with the state of documentation, thereby securing the top developers full cooperation.
Managing the xed-bid relationship as part of a broader engagement. Although the
xed-bid engagement is an ideal way to focus on the outcome of an engagement rather than process, the deliverable of a xed-bid engagement seldom exists in a vacuum. Customers engaging in xed-bid relationships with oshore suppliers must focus on the dependencies between xed-bid components and non-xed-bid components through rigorous project management. In some cases, one presenter explained, the oshore supplier is told to slow down until the non-xed-bid components can catch up. Another customer argued that, while xed-bid is ultimately a preferable basis for an oshore relationship (compared to a temporary stang approach), it still prefers to track individual developers as if its relationship was based on an FTE basis (including hours and error rates). This way, the customer retains a view into the providers own processes and can react quickly if metrics fall out of line.
Billing back oshore charges to end customers. For no other reason than
convenience, most oshore PMOs prefer to pass through oshore charges to end customers without translation. However, the pass-through method skews comparison with in-house costs by ignoring the retained element, thereby encouraging oshore consumption by distorting savings. Realizing this, one customer present at the conferences decided to embrace a blended approach.
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Establishing partnership with oshore suppliers. Several presenters reected on
the importance of building partnership with oshore suppliers. A common theme? The ability to view the oshore supplier as an extension of internal sta is in potential conict with the tendency to employ a variety of suppliers to keep them honest. One speaker observed that it is dicult to build partnerships with more than two or three suppliers and that the benets of bidding out work competitively among them are often overrated. Another speaker engaged with two suppliers, fearing that the scale of its planned engagement would overwhelm any single supplier.
Conducting live vendor evaluations. Oshore outsourcing customers typically
separate vendor evaluation from actual performance. One enterprising customer decided to invite two competing rms on-site for a three-week trial. The vendor with the best performance was awarded the work.
Overall strategy. Time-to-market and the ability to improve speed-to-market for new
application development is a major and often underappreciated driver for oshore outsourcing. Some 40% of Syntels customers, for example, voted it the primary focus of their IT strategies this past year, whereas only 19% indicated that reducing cost in every aspect of their approach was the primary driver. The same philosophy was also much in evidence at Cognizants conference.
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The Contributors John C. McCarthy Vice President John leads Forresters research eorts in the use of oshore providers and business process outsourcing the best practices for successful engagement, pricing models, and vendor assessment. He also manages the research eorts in Japan, India, Southeast Asia, and Australia. In a cover story, Time named Johns brief on oshore a landmark study. In December, The Economist stated, The debate on oshore has been brewing since a study by Forrester and John McCarthy in 2002 claimed that 3.3m white-collar American jobs (500,000 of them in IT) would shift oshore to countries such as India by 2015. In addition to writing the rst report in the industry dening client/ server computing, he has done groundbreaking research on the Internet, privacy, and the Nets impact on government. William Martorelli Principal Analyst Bill is a principal analyst in Forresters IT Management & Services group, with research responsibility for subjects including outsourcing, global sourcing strategies, utility-based services, managed services, business process outsourcing, application hosting, and Web hosting. He has more than 15 years of experience in IT technology and business consulting and has advised many clients on successful outsourcing and services management strategies. Stephanie Moore Vice President Stephanie is an analyst in Forresters IT Management & Services research team. Currently, she is one of Forresters experts on oshore and nearshore outsourcing, devoting most of her time to global sourcing issues. Stephanie has advised hundreds of client companies about outsourcing strategies, tools, technologies, vendors, and methodologies.
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Lou Agosta Principal Analyst As part of the Information Delivery team, Lou focuses on data warehousing, data mining, data quality, and related decision-support issues. Lous coverage areas and recent research include: data warehousing organizational, design, and technology issues and best practices; data warehousing markets; data mining methods, vendors, and market; database decision-support benchmarks; data and information quality; data standardization methods, tools, and markets; and data warehousing Total Economic Impact (TEI). Christine Ferrusi Ross Principal Analyst As part of the IT Management & Services research team, Christine focuses on the technology services market, including consulting, systems integration, business process outsourcing, applications outsourcing, and infrastructure outsourcing. She helps senior executives decide which capabilities to send to outside providers and how to work more eectively with those providers.
September 7, 2004
Upcoming Worldwide Forrester Events

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About Forresters Oshore Outsourcing Research In covering the move of IT and business process outsourcing oshore for more than six years, Forrester has developed a deep understanding of the issues, best practices, pitfalls, and vendor dynamics in this area. During this time, Forrester has written groundbreaking research sizing the movement of jobs oshore, dening the stages of users oshore evolution, and outlining best practices and requirements for selecting the right vendor. We have worked with hundreds of clients as they assess, plan, implement, and manage their oshore initiatives. In addition to 30-minute inquiries, Forrester has worked with clients on longer oshore projects in a number of dierent ways: Presenting to senior management on the facts and ctions of oshore. Planning and accompanying the client on oshore fact-nding missions. Developing overall oshore sourcing strategies. Helping vendors develop their global delivery model strategy. Creating the vendor RFP and managing the supplier selection process. Hosting workshops on the best practices for oshore governance and due diligence. Managing the clients portfolio assessment and internal due process. Assisting vendors in segmenting the market and reviewing their go-to-market strategy. Reviewing vendor collateral and RFP responses to make sure they accurately reect the suppliers dierentiation and value-add. For more information on Forresters oshore outsourcing research and other Forrester products and services, call +1 866/367-7378 in North America, call + 44 20 73237730 in Europe, or visit our Web site at www.forrester.com.
September 7, 2004
H e l p i n g B u s i n e s s T h r i v e O n Te c h n o l o g y C h a n g e
Headquarters Forrester Research, Inc. 400 Technology Square Cambridge, MA 02139 USA Tel: +1 617/613-6000 Fax: +1 617/613-5000 Email: forrester@forrester.com Nasdaq symbol: FORR www.forrester.com Forresters Inuence On Oshore Outsourcing The Fuss Only Fuels The Outsourcing Time | May 24, 2004 THE NUMBER HAS BECOME SOMETHING OF a mantra for the jobless recovery 3.3 million U.S. jobs will move overseas by 2015. Forrester Research came up with the estimate in late 2002, kicking o the current furor over outsourcing, the movement of jobs out of the U.S. Now the consultancy has released its rst revision of that landmark study, and the news is not comforting. Job losses, it concludes, will hit a lot sooner than expected. By the end of next year, Forrester believes, 830,000 jobs will have gone abroad, mainly to India. Thats 242,000 more than it had earlier projected. Forrester Revises Loss Estimates To Overseas Jobs Wall Street Journal | May 17, 2004 Forrester analyst John McCarthy said in November 2002 that he expected a cumulative 3.3 million white-collar jobs to be shifted oshore by 2015. In its updated report, Forrester said it expected a cumulative 830,000 white-collar jobs to be shifted oshore by 2005. The November 2002 estimate projected a shift of just under 600,000 jobs. By 2015 the number is expected to rise to 3.4 million. Mr. McCarthy said the onslaught of media attention to the subject had encouraged more companies to experiment with oshore outsourcing, and that vendors of these services, such as International Business Machines Corp. and Wipro Ltd., have ramped up their businesses. Outsourcing of service jobs grows faster than estimated Cox News Services | May 17, 2004 Its happening more quickly than we anticipated, said Forrester Vice President Stephanie Moore. Moore believes that this is because employers are nding they can signicantly reduce labor costs by sending jobs to low-wage countries, particularly India. Oshoring increases at faster pace, Forrester says IDG News Service | May 17, 2004 The other major factor in the growth of oshore services is that oshoring has become, essentially, a requirement of BPO, the analysts said. BPO growth will inevitably propel the number (of jobs moving oshore) in terms of oshore growth, said Forrester Vice President Bill Martorelli. Oshore is booming and in the context of BPO (it is) highly inseparable.
For information on ordering a hard copy of this report, please contact Eileen Moynihan at +1 617/613-6038, or emoynihan@forrester.com
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Offshore Outsourcing - The Complete Guide (Forrester)

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Offshore Outsourcing - The Complete Guide (Forrester)

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September 7, 2004

Oshore Outsourcing: The Complete Guide

Helping Business Thrive On Technology Change

Forrester Collection | Oshore Outsourcing: The Complete Guide

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Oshore Outsourcing: The Complete Guide

Forrester Collection | Oshore Outsourcing: The Complete Guide

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Forrester Collection | Oshore Outsourcing: The Complete Guide

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Forrester Collection | Oshore Outsourcing: The Complete Guide

Companies increasingly accept and understand the value of oshore outsourcing:

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Forrester Collection | Oshore Outsourcing: The Complete Guide

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Forrester Collection | Oshore Outsourcing: The Complete Guide

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Forrester Collection | Oshore Outsourcing: The Complete Guide

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Forrester Collection | Oshore Outsourcing: The Complete Guide

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Forrester Collection | Oshore Outsourcing: The Complete Guide

Figure 1 How Clients Rate Oshore Versus US Providers

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Forrester Collection | Oshore Outsourcing: The Complete Guide

Figure 2 Firms Face A Variety Of Oshore Hurdles

Application of the vendors CMM expertise. Suppliers like Infosys Technologies,

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Forrester Collection | Oshore Outsourcing: The Complete Guide

Figure 3 Oshore Savings As A Percentage Of Revenue

Figure 4 Examples Of Oshore Vendors And Second-Order Productivity Savings

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Forrester Collection | Oshore Outsourcing: The Complete Guide

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Forrester Collection | Oshore Outsourcing: The Complete Guide

Figure 5 Export Market For Indian Software And Services

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Forrester Collection | Oshore Outsourcing: The Complete Guide

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Forrester Collection | Oshore Outsourcing: The Complete Guide

Accelerated delivery. Indias distance from North America opens up opportunities to

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Forrester Collection | Oshore Outsourcing: The Complete Guide

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Forrester Collection | Oshore Outsourcing: The Complete Guide

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Forrester Collection | Oshore Outsourcing: The Complete Guide

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Forrester Collection | Oshore Outsourcing: The Complete Guide

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Forrester Collection | Oshore Outsourcing: The Complete Guide

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Forrester Collection | Oshore Outsourcing: The Complete Guide

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Forrester Collection | Oshore Outsourcing: The Complete Guide

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Forrester Collection | Oshore Outsourcing: The Complete Guide

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Forrester Collection | Oshore Outsourcing: The Complete Guide

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Forrester Collection | Oshore Outsourcing: The Complete Guide

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Forrester Collection | Oshore Outsourcing: The Complete Guide